As filed with the Securities and Exchange Commission on April 24, 2002
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 9 [X]
(Check appropriate box or boxes)
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STRATEGIC PARTNERS OPPORTUNITY FUNDS
(formerly Strategic Partners Series)
(Exact name of registrant as specified in charter)
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (973) 367-1495
George P. Attisano
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102-4077
(Name and Address of Agent for Service)
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
[_]immediately upon filing pursuant to paragraph (b)
[X]on April 26, 2002, pursuant to paragraph (b)
[_]60 days after filing pursuant to paragraph (a)(1)
[_]on (date) pursuant to paragraph (a)(1)
[_]75 days after filing pursuant to paragraph (a)(2)
[_]on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[_]this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
Title of securities being registered . . . . Shares of beneficial interest, par value $.001 per share.
Explanatory Note
This post-effective amendment to the registration statement of Strategic Partners Opportunity Funds (File No. 333-95849) is not intended to amend the prospectus or statement of additional information of Strategic Partners Mid-Cap Value Fund, dated April 15, 2002.
PROSPECTUS APRIL 26, 2002
STRATEGIC PARTNERS
OPPORTUNITY FUNDS
STRATEGIC PARTNERS FOCUSED GROWTH FUND
STRATEGIC PARTNERS NEW ERA GROWTH FUND
STRATEGIC PARTNERS FOCUSED VALUE FUND
Each Fund's Objective: Seeks long-term growth of capital
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved the Funds' shares nor has the SEC determined that this prospectus is complete or accurate. It is a criminal offense to state otherwise.
1 Risk/Return Summary
1 Investment Objective and Principal Strategies
3 Principal Risks
4 Evaluating Performance
7 Fees and Expenses
11 How the Funds Invest
11 Investment Policies
14 Other Investments and Strategies
18 Investment Risks
22 How the Trust is Managed
22 Board of Trustees
22 Manager
23 Investment Advisers
23 Portfolio Managers
26 Distributor
27 Fund Distributions and Tax Issues
27 Distributions
28 Tax Issues
29 If You Sell or Exchange Your Shares
31 How to Buy, Sell and Exchange Shares of the Funds
31 How to Buy Shares
39 How to Sell Your Shares
42 How to Exchange Your Shares
44 Telephone Redemptions or Exchanges
44 Expedited Redemption Privilege
45 Financial Highlights
58 The Strategic Partners Mutual Fund Family
For More Information (Back Cover)
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STRATEGIC PARTNERS OPPORTUNITY FUNDS [PHONE] (800) 225-1852
This section highlights key information about three investment portfolios (each a Fund) of STRATEGIC PARTNERS OPPORTUNITY FUNDS, formerly Strategic Partners Series (the Trust). The three Funds described in this prospectus are the STRATEGIC PARTNERS FOCUSED GROWTH FUND (THE FOCUSED GROWTH FUND), the STRATEGIC PARTNERS NEW ERA GROWTH FUND (THE NEW ERA GROWTH FUND) and the STRATEGIC PARTNERS FOCUSED VALUE FUND (THE FOCUSED VALUE FUND). Additional information follows this summary.
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
ALL FUNDS
Each Fund's investment objective is LONG-TERM GROWTH OF CAPITAL. This means we seek investments whose price will increase over several years. Each Fund's strategy is to combine the efforts of two investment advisers (Advisers) and to invest in their favorite stock selection ideas. Each Adviser builds a portfolio with stocks in which it has the highest confidence and may invest more than 5% of the Fund's assets in any one issuer. Each Fund may invest in foreign securities. Each Fund may actively and frequently trade its portfolio securities.
During market declines, an Adviser may add to positions in favored stocks, which can result in a somewhat more aggressive strategy, with a gradual reduction of the number of companies in which the adviser invests. Conversely, in rising markets, an Adviser may reduce or eliminate fully valued positions, which can result in a more conservative investment strategy, with a gradual increase in the number of companies represented in the Adviser's segment of the Fund.
While we make every effort to achieve our objective, we can't guarantee success.
FOCUSED GROWTH FUND
We normally invest at least 65% of the Fund's total assets in equity-related securities of U.S. companies that we believe have strong capital appreciation potential. The primary equity-related securities in which the Fund invests are common stocks. Each Adviser uses a growth style to select approximately 20 securities.
NEW ERA GROWTH FUND
We normally invest at least 65% of the Fund's total assets in equity-related securities of emerging U.S. companies that we believe have strong capital appreciation potential. Emerging companies may be of any size. These companies are expected to have products, technologies, management, markets and opportunities that will help achieve an earnings growth over time that is well above the growth rate of the overall U.S. economy.
FOCUSED VALUE FUND
We normally invest at least 65% of the Fund's total assets in equity-related securities of small-, mid- and large-sized U.S. companies that we believe have strong capital appreciation potential. Each Adviser uses a value investment style to select approximately 20 to 30 securities.
SECURITY SELECTION
FOCUSED GROWTH AND NEW ERA GROWTH FUNDS (THE GROWTH FUNDS). In deciding which stocks to buy, each Growth Fund Adviser uses what is known as a growth investment style. This means that an Adviser will invest in stocks that it believes could experience superior sales or earnings growth. Generally, an Adviser will consider selling or reducing a stock position when, in its opinion, the stock has experienced a fundamental disappointment in earnings; it has reached an intermediate-term price objective and its outlook no longer seems sufficiently promising; a relatively more attractive stock emerges; or the stock has experienced adverse price movement. A stock's price decline does not necessarily mean that an Adviser will sell the stock at that time.
FOCUSED VALUE FUND. In deciding which stocks to buy, each Focused Value Fund Adviser uses what is known as a value investment style. This means that an Adviser will invest in stocks that it believes are undervalued based on its analysis of price-to-current earnings, book value, asset value, or other factors. We look for stocks meeting these criteria in all sectors of the market. Generally, an Adviser will consider selling or reducing a stock position when, in its opinion, the company no longer exhibits the characteristics that foster sustainable long-term growth, minimize risk and enhance the potential for superior long-term returns. A price decline of a stock does not necessarily mean that an Adviser will sell the stock at that time.
2 STRATEGIC PARTNERS OPPORTUNITY FUNDS [PHONE] (800) 225-1852
PRINCIPAL RISKS
ALL FUNDS
Although we try to invest wisely, all investments involve risk. Since each Fund invests primarily in equity-related securities, there is the risk that the price of a particular stock we own could go down, or the value of the equity markets or a sector of them could go down. Stock markets are volatile. A Fund's holdings can vary significantly from broad market indexes; performance of the Fund can deviate from the performance of such indexes.
Each Fund is NONDIVERSIFIED, meaning we can invest more than 5% of our assets in the securities of any one issuer. Investing in a nondiversified mutual fund involves greater risk than investing in a diversified fund because a loss resulting from the decline in the value of one security may represent a greater portion of the total assets of a nondiversified fund.
Each Fund is subject to the price volatility of SMALL- AND MEDIUM-SIZED COMPANY STOCKS. Generally, the stock prices of small- and medium-sized companies vary more than the prices of large company stocks and may present greater risks.
Each Fund may invest in COMPANIES THAT REINVEST THEIR EARNINGS rather than distribute them to shareholders. As a result, none of the Funds is likely to receive significant dividend income on its portfolio securities.
* * *
Like any mutual fund, an investment in a Fund could lose value and you could lose money. For more detailed information about the risks associated with the Fund, see "How the Funds Invest--Investment Risks."
An investment in a Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
EVALUATING PERFORMANCE
A number of factors--including risk--can affect how a Fund performs. The following bar charts show the performance of each of the Growth Funds for its only full calendar year of operation. The bar charts and tables that follow demonstrate the risk of investing in each Growth Fund by showing how its average annual total returns compare with a broad-based securities market index and a group of similar mutual funds. The returns of market indexes and mutual fund peer groups, which do not include the effect of any sales charges or operating expenses of a mutual fund or taxes, would be lower if the returns included the effect of these factors.
The Growth Funds' annual returns do not include sales charges. If sales charges were included, the annual returns would be less than those shown. In addition, without the distribution and service (12b-1) fee waiver, the annual returns would have been lower.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts (IRAs).
Past performance (before and after taxes) does not mean that a Fund will achieve similar results in the future.
Because the Focused Value Fund has not been in operation for a full calendar year, no performance history for this Fund is included in this prospectus.
4 STRATEGIC PARTNERS OPPORTUNITY FUNDS [PHONE] (800) 225-1852
FOCUSED GROWTH FUND
[CHART]
Annual Returns of Class B Shares
BEST QUARTER: 13.77% (4th quarter of 2001) WORST QUARTER: -21.26% (3rd quarter of 2001)
AVERAGE ANNUAL TOTAL RETURNS/1/ (AS OF 12-31-2001)
1 YR SINCE INCEPTION (6-2-00)
Class A shares -22.16% -27.30%
Class B shares -22.62% -27.33%
Class C shares -20.17% -25.90%
Class Z shares -17.78% -24.69%
CLASS B SHARES
RETURN BEFORE TAXES -22.62% -27.33%
RETURN AFTER TAXES ON DISTRIBUTIONS -22.62% -27.33%
RETURN AFTER TAXES ON DISTRIBUTIONS
AND SALE OF FUND SHARES -13.78% -21.43%
Index (REFLECTS NO DEDUCTION FOR FEES, EXPENSES OR TAXES)
S&P 500/2/ -11.88% -11.49%
Russell 1000 Growth Index/3/ -20.42% -24.78%
Lipper Average/4/ -22.94% -21.46%
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1The Fund's returns are after deduction of sales charges and expenses.
2The Standard & Poor's 500 Composite Stock Price Index (the S&P 500)--an unmanaged index of 500 stocks of large U.S. companies--gives a broad look at how stock prices have performed.
3The Russell 1000 Growth Index contains those securities in the Russell 1000
Index with a greater-than-average growth orientation. Companies in this Index
tend to exhibit higher price-to-book and price-to-earnings ratios. Source:
Lipper Inc.
4The Lipper Average is based on the average return of all mutual funds in the Lipper Large-Cap Growth Funds category.
NEW ERA GROWTH FUND
[CHART]
Annual Returns of Class B Shares
BEST QUARTER: 20.13% (4th quarter of 2001) WORST QUARTER: (29.60)% (3rd quarter of 2001)
AVERAGE ANNUAL TOTAL RETURNS/1/ (AS OF 12-31-2001)
1 YR SINCE INCEPTION (11-22-00)
Class A shares -29.55% -26.69%
Class B shares -30.19% -26.54%
Class C shares -27.98% -25.15%
Class Z shares -25.62% -22.94%
CLASS B SHARES
RETURN BEFORE TAXES -30.19% -26.54%
RETURN AFTER TAXES ON DISTRIBUTIONS -30.19% -26.54%
RETURN AFTER TAXES ON DISTRIBUTIONS
AND SALE OF FUND SHARES -18.38% -21.15%
Index (REFLECTS NO DEDUCTION FOR FEES, EXPENSES OR TAXES)
S&P 500/2/ -11.88% -10.61%
Russell 3000 Growth Index/3/ -19.63% -20.20%
Lipper Average/4/ -26.06% -22.53%
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1 The Fund's returns are after deduction of sales charges and expenses.
2 The S&P 500--an unmanaged index of 500 stocks of large U.S. companies--gives a broad look at how stock prices have performed.
3 The Russell 3000 Growth Index contains those securities in the Russell 1000 Index and the Russell 2000 Index with a greater-than-average growth orientation. Companies in this Index tend to exhibit higher price book and price-to-earnings ratios. Source: Lipper Inc.
4 The Lipper Average is based on the average return of all mutual funds in the Lipper Multi-Cap Growth Funds category.
6 STRATEGIC PARTNERS OPPORTUNITY FUNDS [PHONE] (800) 225-1852
FEES AND EXPENSES
These tables show the sales charges, fees and expenses that you may pay if you buy and hold shares of each share class of a Fund --Classes A, B, C and Z. Each share class has different sales charges --known as loads --and expenses, but represents an investment in the same fund. Class Z shares are available only to a limited group of investors. For more information about which share class may be right for you, see "How to Buy, Sell and Exchange Shares of the Funds."
SHAREHOLDER FEES/1/ (PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A CLASS B CLASS C CLASS Z
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price) 5% None 1% None
Maximum deferred sales charge (load) (as a percentage of
the lower of original purchase price or sale proceeds) 1%/2/ 5%/3/ 1%/4/ None
Maximum sales charge (load) imposed on reinvested dividends
and other distributions None None None None
Redemption fees None None None None
Exchange fee None None None None
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1 Your broker may charge you a separate or additional fee for purchases and sales of shares.
2 Investors who purchase $1 million or more of Class A shares are subject to a contingent deferred sales charge (CDSC) of 1% for shares redeemed within 12 months of purchase. This charge is waived for all such Class A shareholders other than those who purchased their shares through certain broker-dealers that are not affiliated with Prudential Financial, Inc. (Prudential).
3 The contingent deferred sales charge (CDSC) for Class B shares decreases by 1% annually to 1% in the fifth and sixth years and 0% in the seventh year. Class B shares convert to Class A shares approximately seven years after purchase.
4 The CDSC for Class C shares is 1% for shares redeemed within 18 months of purchase.
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
CLASS A CLASS B CLASS C CLASS Z
FOCUSED GROWTH FUND
Management fees .90% .90% .90% .90%
+ Distribution and service (12b-1) fees .30% 1.00% 1.00% None
+ Other expenses .27% .27% .27% .27%
= TOTAL ANNUAL FUND OPERATING EXPENSES 1.47% 2.17% 2.17% 1.17%
- Fee waiver* .05% None None None
= NET ANNUAL FUND OPERATING EXPENSES 1.42% 2.17% 2.17% 1.17%
NEW ERA GROWTH FUND
Management fees .90% .90% .90% .90%
+ Distribution and service (12b-1) fees .30% 1.00% 1.00% None
+ Other expenses .39% .39% .39% .39%
= TOTAL ANNUAL FUND OPERATING
EXPENSES 1.59% 2.29% 2.29% 1.29%
- Fee waiver* .05% None None None
= NET ANNUAL FUND OPERATING EXPENSES 1.54% 2.29% 2.29% 1.29%
FOCUSED VALUE FUND
Management fees .90% .90% .90% .90%
+ Distribution and service (12b-1) fees .30% 1.00% 1.00% None
+ Other expenses .34% .34% .34% .34%
= TOTAL ANNUAL FUND OPERATING
EXPENSES 1.54% 2.24% 2.24% 1.24%
- Fee waiver* .05% None None None
= NET ANNUAL FUND OPERATING EXPENSES 1.49% 2.24% 2.24% 1.24%
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*For the fiscal years ending 7-31-02 and 7-31-03, the Distributor of the Funds has contractually agreed to reduce its distribution and service (12b-1) fees for Class A shares to .25 of 1% of the average daily net assets of each Fund's Class A shares.
EXAMPLE
This example will help you compare the fees and expenses of the Funds' different share classes and the cost of investing in the Funds with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in a Fund for the time periods indicated and then sell all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same, except for the Distributor's reduction of distribution and service (12b-1) fees for Class A shares during the first two fiscal years. Although your actual costs may be higher or lower, based on these assumptions, your costs would be:
1 YR 3 YRS 5 YRS 10 YRS
FOCUSED GROWTH FUND
Class A shares $637 $ 937 $1,258 $2,165
Class B shares $720 $ 979 $1,264 $2,243
Class C shares $418 $ 772 $1,253 $2,578
Class Z shares $119 $ 372 $ 644 $1,420
NEW ERA GROWTH FUND
Class A shares $649 $ 972 $1,318 $2,291
Class B shares $732 $1,015 $1,325 $2,368
Class C shares $430 $ 808 $1,313 $2,699
Class Z shares $131 $ 409 $ 708 $1,556
FOCUSED VALUE FUND
Class A shares $644 $ 957 $1,293 $2,239
Class B shares $727 $1,000 $1,300 $2,316
Class C shares $425 $ 793 $1,288 $2,649
Class Z shares $126 $ 393 $ 681 $1,500
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You would pay the following expenses on the same investment if you did not sell your shares:
1 YR 3 YRS 5 YRS 10 YRS
FOCUSED GROWTH FUND
Class A shares $637 $937 $1,258 $2,165
Class B shares $220 $679 $1,164 $2,243
Class C shares $318 $772 $1,253 $2,578
Class Z shares $119 $372 $ 644 $1,420
NEW ERA GROWTH FUND
Class A shares $649 $972 $1,318 $2,291
Class B shares $232 $715 $1,225 $2,368
Class C shares $330 $808 $1,313 $2,699
Class Z shares $131 $409 $ 708 $1,556
FOCUSED VALUE FUND
Class A shares $644 $957 $1,293 $2,239
Class B shares $227 $700 $1,200 $2,316
Class C shares $325 $793 $1,288 $2,649
Class Z shares $126 $393 $ 681 $1,500
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INVESTMENT POLICIES
ALL FUNDS
In addition to common stocks in which each Fund primarily invests, equity-related securities include nonconvertible preferred stocks; convertible securities; American Depositary Receipts (ADRs); warrants and rights that can be exercised to obtain stock; investments in various types of business ventures, including partnerships and joint ventures; real estate investment trusts (REITs); and similar securities. Convertible securities are securities-- like bonds, corporate notes and preferred stocks--that we can convert into the company's common stock or some other equity security.
REITs invest primarily in real estate or real estate mortgages and distribute almost all of their income--most of which comes from rents, mortgages and gains on sales of property--to shareholders. While REITs themselves do not pay income taxes if they meet certain IRS requirements, the distributions they make to investors are taxable. Each of the FOCUSED GROWTH and FOCUSED VALUE FUNDS may invest in REITs as part of its principal investment strategy. The NEW ERA GROWTH Fund may invest in REITs as a secondary strategy.
FOCUSED GROWTH FUND
We may buy common stocks of companies of every size--small-, medium- and large-capitalization--although our investments are mostly in medium- and large-capitalization stocks. The Fund intends to be fully invested, holding less than 5% of its total assets in cash under normal market conditions.
ALLIANCE CAPITAL MANAGEMENT'S portfolio manager, ALFRED HARRISON, uses fundamental analysis and research of Alliance's large internal research staff. In selecting stocks for the Fund, he emphasizes stock selection and investment in a limited number of companies that have strong management, superior industry positions, excellent balance sheets and the ability to demonstrate superior earnings growth.
JENNISON ASSOCIATES LLC'S (JENNISON'S) portfolio managers, SPIROS SEGALAS and KATHLEEN MCCARRAGHER, invest in mid-size and large companies experiencing some or all of the following: high sales growth, high unit growth, high or improving returns on assets and equity and a strong balance sheet. These companies generally trade at high prices relative to their current earnings.
NEW ERA GROWTH FUND
We may buy common stocks of companies of every size--small-, medium- and large-capitalization. The Fund intends to be fully invested, holding less than 5% of its total assets in cash under normal market conditions.
The Fund may participate in the initial public offering (IPO) market. IPO investments may increase the Fund's total returns. As the Fund's assets grow, the impact of IPO investments will decline, which may reduce the Fund's total returns.
MASSACHUSETTS FINANCIAL SERVICES COMPANY'S portfolio managers, JOHN BALLEN and DALE DUTILE, use a "bottom-up" approach to look for companies of any size that they believe are either early in their life cycle, but which have the potential to become major enterprises, or are major enterprises whose rates of earnings growth are expected to accelerate because of special factors, such as rejuvenated management, new products, changes in consumer demand, or basic changes in the economic environment.
JENNISON portfolio manager, SUSAN HIRSCH, looks primarily for small and medium-sized companies that have growth in sales and earnings driven by products or services. These companies usually have a unique market niche, a strong new product profile or superior management. She analyzes companies using both fundamental and quantitative techniques.
FOCUSED VALUE FUND
The Fund intends to be fully invested, holding less than 5% of its total assets in cash under normal market conditions.
The portfolio managers of DAVIS SELECTED ADVISERS LP (DAVIS), CHRISTOPHER
C. DAVIS and KENNETH CHARLES FEINBERG, focus primarily on value stocks of
larger U.S. companies with market capitalizations of at least $5 billion. They
look for companies with sustainable earnings per share growth rates selling at
modest price-earnings multiples that they anticipate will expand as other
investors recognize the company's true worth. They conduct extensive research
to search for companies possessing several of the following characteristics:
first class management, management ownership, strong returns on capital, lean
expense structure, dominant or growing market share in a growing market, proven
record as an acquirer, strong balance sheet, competitive products or services,
successful international operations and innovation. Davis believes that if an
investor combines a
sustainable earnings per share growth rate with a gradually expanding price-earnings multiple, these rates compound and can generate returns that could exceed average returns for the large capitalization domestic stocks sector.
In selecting individual companies for investment, ROSS S. MARGOLIES and JOHN B. CUNNINGHAM, CFA, portfolio managers at SALOMON BROTHERS ASSET MANAGEMENT INC., employ fundamental analysis to search for companies the share prices of which appear to undervalue company assets or do not adequately reflect favorable industry trends, earnings declines that the portfolio managers believe are short-term in nature or other factors. They also look for companies possessing several of the following characteristics: competitive market position, competitive products and services, strong cash flow and experienced and effective management. They will evaluate special situations, such as current or possible changes in management, corporate policies, capitalization or regulatory environment, which may boost a company's sales, earnings, cash flow or share price. They also may consider growth potential due to technological advances, new products or services, new methods of marketing or production, changes in demand or other significant new developments that may enhance a company's future earnings.
DIVISION OF ASSETS
Strategy. Under normal conditions, there will be an approximately equal
division of each Fund's assets between its two Advisers. All daily cash inflows (that is, purchases and reinvested distributions) and outflows (that is, redemptions and expense items) will be divided between the two Advisers as the Manager deems appropriate. There will be a periodic rebalancing of each segment's assets to take account of market fluctuations in order to maintain the approximately equal allocation. As a consequence, the Manager may allocate assets from the portfolio segment that has appreciated more to the other.
Impact of Reallocations. Reallocations may result in additional costs since sales of securities may result in higher portfolio turnover. Also, because each Adviser selects portfolio securities independently, it is possible that a security held by one portfolio segment may also be held by the other portfolio segment of a Fund or that the two Advisers may simultaneously favor the same industry. The Manager will monitor each Fund's overall portfolio to
ensure that any such overlaps do not create an unintended industry concentration. In addition, if one Adviser buys a security as the other Adviser sells it, the net position of a Fund in the security may be approximately the same as it would have been with a single portfolio and no such sale and purchase, but the Fund will have incurred additional costs. The Manager will consider these costs in determining the allocation of assets. The Manager will consider the timing of reallocation based upon the best interests of a Fund and its shareholders. To maintain a Fund's federal income tax status as a regulated investment company, the Manager also may have to sell securities on a periodic basis and the Fund could realize capital gains that would not have otherwise occurred.
* * *
For more information, see "Investment Risks" and the Statement of Additional Information, "Description of the Funds, Their Investments and Risks." The Statement of Additional Information--which we refer to as the SAI--contains additional information about the Funds. To obtain a copy, see the back cover page of this prospectus.
Each Fund's investment objective is a fundamental policy that cannot be changed without shareholder approval. The Board can change investment policies that are not fundamental.
OTHER INVESTMENTS AND STRATEGIES
In addition to the principal strategies described above, we may also use the following investment strategies to try to increase a Fund's returns or protect its assets if market conditions warrant.
FOREIGN SECURITIES
We may invest in FOREIGN SECURITIES, including stocks and other equity-related
securities, money market instruments and other fixed-income securities of
foreign issuers. We do not consider ADRs and other similar receipts or shares
traded in U.S. markets to be foreign securities.
MONEY MARKET INSTRUMENTS
Each Fund may temporarily hold cash or invest in high-quality foreign or domestic MONEY MARKET INSTRUMENTS pending investment of proceeds from new sales of Fund shares or to meet ordinary daily cash needs, subject to the
policy of normally investing at least 65% of the Fund's assets in equity-related securities. Money market instruments include the commercial paper of corporations, certificates of deposit, bankers' acceptances and other obligations of domestic and foreign banks, nonconvertible debt securities (corporate and government), short-term obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities, repurchase agreements and cash (foreign currencies or U.S. dollars).
REPURCHASE AGREEMENTS
Each Fund may use REPURCHASE AGREEMENTS, where a party agrees to sell a security to the Fund and then repurchase it at an agreed-upon price at a stated time. This creates a fixed return for a Fund and is, in effect, a loan by the Fund. Repurchase agreements are used for cash management purposes.
TEMPORARY DEFENSIVE INVESTMENTS
In response to adverse market, economic, political or other conditions, we may temporarily invest up to 100% of a Fund's assets in MONEY MARKET INSTRUMENTS. Investing heavily in these securities limits our ability to achieve our investment objective, but can help to preserve the Fund's assets when the equity markets are unstable.
U.S. GOVERNMENT SECURITIES
Each Fund may invest in securities issued or guaranteed by the U.S. Treasury or by an agency or instrumentality of the U.S. government. Not all U.S. government securities are backed by the full faith and credit of the United States. Some are supported only by the credit of the issuing agency.
SHORT SALES
Each Fund may make SHORT SALES of a security. This means that a Fund may sell a security that it does not own when we think the value of the security will decline. A Fund generally borrows the security to deliver to the buyer in a short sale. The Fund must then buy the security at its market price when the borrowed security must be returned to the lender. Short sales involve costs and risk. The Fund must pay the lender interest on the security it borrows, and the Fund will lose money if the price of the security increases between the time of the short sale and the date when the Fund replaces the borrowed security. Each of the NEW ERA GROWTH and FOCUSED VALUE FUNDS also may
make SHORT SALES "AGAINST THE BOX." In a short sale against the box, at the time of sale, a Fund owns or has the right to acquire the identical security at no additional cost. When selling short against the box, a Fund gives up the opportunity for capital appreciation in the security.
DERIVATIVE STRATEGIES
We may use various derivative strategies to try to improve a Fund's returns. We may use hedging techniques to try to protect a Fund's assets. We cannot guarantee that these strategies will work, that the instruments necessary to implement these strategies will be available, or that the Fund will not lose money. Derivatives--such as FUTURES, OPTIONS AND OPTIONS ON FUTURES-- involve costs and can be volatile. With derivatives, an Adviser tries to predict whether the underlying investment--a security, market index, currency, interest rate or some other benchmark--will go up or down at some future date. We may use derivatives to try to reduce risk or to increase return consistent with a Fund's overall investment objective. An Adviser will consider other factors (such as cost) in deciding whether to employ any particular strategy or use any particular instrument. Any derivatives we use may not match a Fund's underlying holdings.
Options. Each Fund may purchase and sell put and call options on securities indexes traded on U.S. or foreign securities exchanges or in the over-the-counter market. An OPTION is the right to buy or sell securities in exchange for a premium. A Fund will sell only covered options.
Futures Contracts and Related Options. A Fund may purchase and sell stock index futures contracts and related options on stock index futures. A Fund may purchase and sell futures contracts on foreign currencies and related options on foreign currency futures contracts. A FUTURES CONTRACT is an agreement to buy or sell a set quantity of an underlying product at a future date, or to make or receive a cash payment based on the value of a securities index. The terms of futures contracts are standardized. In the case of a financial futures contract based upon a broad index, there is no delivery of the securities comprising the index, margin is uniform, a clearing corporation or an exchange is the counterparty and a Fund makes daily margin payments based on price movements in the index. Each Fund also may enter into foreign currency forward contracts to protect the value of its
assets against future changes in the level of foreign exchange rates. A FOREIGN CURRENCY FORWARD CONTRACT is an obligation to buy or sell a given currency on a future date at a set price. Delivery of the underlying currency is expected, the terms are individually negotiated, the counterparty is not a clearing corporation or an exchange and payment on the contract is made upon delivery, rather than daily.
For more information about these strategies, see the SAI, "Description of the Funds, Their Investments and Risks--Risk Management and Return Enhancement Strategies."
ADDITIONAL STRATEGIES
Each Fund also follows certain policies when it BORROWS MONEY (each Fund can borrow up to 33 1/3% of the value of its total assets); LENDS ITS SECURITIES to others for cash management purposes (each Fund can lend up to 33 1/3% of the value of its total assets including collateral received in the transaction); and HOLDS ILLIQUID SECURITIES (each Fund may hold up to 15% of its net assets in illiquid securities, including securities with legal or contractual restrictions on resale, those without a readily available market and repurchase agreements with maturities longer than seven days). Each Fund is subject to certain investment restrictions that are fundamental policies, which means they cannot be changed without shareholder approval. For more information about these restrictions, see the SAI.
PORTFOLIO TURNOVER
It is not a principal strategy of any Fund to actively and frequently trade its portfolio securities to achieve its investment objective. Nevertheless, as a result of the strategies described above, a Fund may have an annual portfolio turnover rate of over 100%. For the fiscal year ended February 28, 2002, the Focused Growth, New Era Growth and Focused Value Funds had annual portfolio turnover rates of 76%, 196% and 65%,respectively. Portfolio turnover is generally the percentage found by dividing the lesser of portfolio purchases and sales by the monthly average value of the portfolio. High portfolio turnover may occur due to active portfolio management by the Advisers or as a result of reallocations between Advisers. High portfolio turnover (100% or more) results in higher brokerage commissions and other costs and can affect the Fund's performance. It also can result in a greater
amount of distributions as ordinary income rather than long-term capital gains.
INVESTMENT RISKS
All investments involve risk, and investing in the Funds is no exception. Since a Fund's holdings can vary significantly from broad market indexes, performance of the Fund can deviate from performance of the indexes. This chart outlines the key risks and potential rewards of the Funds' principal investments and certain other non-principal investments the Funds may make. Unless otherwise noted, a Fund's ability to engage in a particular type of investment is expressed as a percentage of total assets. The investment types are listed in the order in which they normally will be used by the portfolio managers. See, "Description of the Funds, Their Investments and Risks" in the SAI.
INVESTMENT TYPE
% of Fund's Assets RISKS POTENTIAL REWARDS
EQUITY-RELATED . Individual stocks could lose . Historically, stocks have
SECURITIES value outperformed other
. The equity markets could investments over the long
All Funds go down, resulting in a term
decline in value of the . Generally, economic
At least 65% Fund's investments growth means higher
. Changes in economic or corporate profits, which
political conditions, both lead to an increase in
domestic and stock prices, known as
international, may result in capital appreciation
a decline in value of a
Fund's investments
-----------------------------------------------------------------------------------------
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INVESTMENT TYPE (CONT'D)
% of Fund's Assets RISKS POTENTIAL REWARDS
EQUITY-RELATED . Stocks of small and . Highly successful smaller
SECURITIES OF SMALL- AND medium-sized companies companies can out
MEDIUM-SIZED are more volatile and may perform larger ones
COMPANIES decline more than those in
the S&P 500
Focused Growth and . Smaller companies are
New Era Growth Funds more likely to reinvest
earnings and not pay
Up to 100% dividends
. Changes in interest rates
Focused Value Fund may affect the securities of
small and medium-sized
Usually less than 50% companies more than the
securities of larger
companies
-----------------------------------------------------------------------------------------------
REITS . Performance depends on . Real estate holdings can
the strength of real estate generate good returns
All Funds market, REIT management from rents, rising market
and property values, etc.
Up to 25%; usually less management, which can . Greater diversification of
than 10% be affected by many real estate investments
factors, including national than direct ownership
and regional economic . Provides diversification in
conditions an investment portfolio
. REITs invested primarily in
real estate mortgages may
be affected by the quality
of any credit extended and
the timing of payment
-----------------------------------------------------------------------------------------------
|
INVESTMENT TYPE (CONT'D)
% of Fund's Assets RISKS POTENTIAL REWARDS
FOREIGN SECURITIES . Foreign markets, . Investors can participate
economies and political in the growth of foreign
Focused Growth and systems may not be as markets through
Focused Value Funds stable as in the U.S. investment in companies
. Currency risk -- changing operating in those
Up to 20%; usually less values of foreign markets
than 10% currencies can cause . May profit from changing
losses values of foreign
New Era Growth Fund . May be less liquid than currencies
U.S. stocks and bonds . Opportunities for
Up to 35%; usually less . Differences in foreign diversification
than 10% laws, accounting
standards, public
information, custody and
settlement practices
provide less reliable
information on foreign
investments and involve
more risk
----------------------------------------------------------------------------------------------
DERIVATIVES . The value of derivatives . A Fund could make
(such as futures and money and protect
All Funds options) that are used to against losses if the
hedge a portfolio security investment analysis proves
Percentage varies; is determined correct
usually less than 10% independently from that . One way to manage a
security and could result Fund's risk/return balance
in a loss to a Fund when is by locking in the value
the price movement of of an investment ahead of
the derivative does not time
correlate with a change in
the value of the portfolio
security
. Derivatives used for risk
management may not
have the intended effects
and may result in losses
or missed opportunities
. The other party to a deriv-
atives contract could
default
----------------------------------------------------------------------------------------------
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INVESTMENT TYPE (CONT'D)
% of Fund's Assets RISKS POTENTIAL REWARDS
U.S. GOVERNMENT . Some are not insured or . May preserve a Fund's
SECURITIES guaranteed by the assets
government but only by . Principal and interest may
All Funds the issuing agency be guaranteed by the
. Limits potential for capital U.S. government
Up to 35%; usually less appreciation
than 10% . Interest rate risk -- the risk
that the value of most
debt obligations will fall
when interest rates rise;
the longer its maturity,
the more its value
typically falls
------------------------------------------------------------------------------------------------
SHORT SALES . May magnify underlying . May magnify underlying
investment losses investment gains
All Funds . Investment costs may
exceed potential
Up to 25% of net assets; underlying investment
usually less than 10% gains
------------------------------------------------------------------------------------------------
ILLIQUID SECURITIES . May be difficult to value . May offer a more
precisely attractive yield or
All Funds . May be difficult to sell at potential for growth than
the time or price desired more widely traded
Up to 15% of net assets securities
------------------------------------------------------------------------------------------------
MONEY MARKET . Limits potential for capital . May preserve a Fund's
INSTRUMENTS appreciation assets
. Credit risk -- the risk that
All Funds the default of an issuer
would leave a Fund with
Up to 35% on a normal unpaid interest or
basis and up to 100% on a principal
temporary basis . Market risk -- the risk that
the market value of an
investment may move up
or down. Market risk may
affect an industry, a
sector or the market as a
whole
------------------------------------------------------------------------------------------------
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How the Trust is Managed
BOARD OF TRUSTEES
The Trust's Board of Trustees (the Board) oversees the actions of the Manager, Sub-Manager (Focused Growth Fund), Advisers and Distributor, and decides on general policies. The Board also oversees the Trust's officers, who conduct and supervise the daily business operations of each Fund.
MANAGER
PRUDENTIAL INVESTMENTS LLC (PI)
GATEWAY CENTER THREE, 100 MULBERRY STREET
NEWARK, NJ 07102-4077
Under a management agreement with the Trust, PI manages each Fund's investment operations and administers its business affairs. PI has responsibility for all investment advisory services and supervises the Advisers. For the fiscal year ended February 28, 2002, each Fund paid PI management fees equal to an annual rate of 0.90% of its average net assets.
Subject to the supervision of the Board, PI is responsible for conducting the initial review of prospective Advisers for the Trust. In evaluating a prospective Adviser, PI considers many factors, including the firm's experience, investment philosophy and historical performance. PI is also responsible for monitoring the performance of the Advisers.
PI and its predecessors have served as manager or administrator to investment companies since 1987. As of December 31, 2001, PI, a wholly-owned subsidiary of Prudential, served as the investment manager to all of the Prudential U.S. and offshore investment companies, and as manager or administrator to closed-end investment companies, with aggregate assets of approximately $100.8 billion.
How the Trust is Managed
MANAGER-OF-MANAGERS STRUCTURE (FOCUSED VALUE FUND)
With respect to the Focused Value Fund, PI and the Trust operate under an exemptive order (the Order) from the Securities and Exchange Commission that generally permits PI to enter into or amend agreements with Advisers without obtaining shareholder approval each time. This authority is subject to certain conditions, including the requirement that the Board must approve any new or amended agreements with Advisers. Shareholders of the Focused Value Fund still have the right to terminate these agreements at any time by a vote of the majority of outstanding shares of the Fund. The Trust will notify shareholders of any new Advisers or material amendments to advisory agreements made pursuant to the Order. Although the Order currently does not apply to the Focused Growth or New Era Growth Funds, shareholders of these Funds may vote to approve this structure.
SUB-MANAGER (FOCUSED GROWTH FUND)
PRUDENTIAL INVESTMENT MANAGEMENT, INC. (PIM) serves as the Sub-Manager for the portion of the Fund managed by JENNISON. PIM's address is Prudential Plaza, 751 Broad Street, Newark, NJ 07102. PIM provides services to PI as PI may request from time to time in the management and administration of the Fund. PIM has served as an adviser to mutual funds since 1984.
INVESTMENT ADVISERS
FOCUSED GROWTH FUND
ALLIANCE CAPITAL MANAGEMENT, L.P. (ALLIANCE) and JENNISON are the Fund's
Advisers.
ALLIANCE is a leading international investment adviser, supervising client accounts with assets as of December 31, 2001 of approximately $455 billion. Alliance has served as an investment adviser to mutual funds since 1983. Alliance's address is 1345 Avenue of the Americas, New York, NY 10105.
ALFRED HARRISON has been portfolio manager for the segment of the Fund's assets advised by Alliance since the Fund's inception. Mr. Harrison joined Alliance in 1978 and is manager of the firm's Minneapolis office. He is Vice Chairman of Alliance Capital Management Corporation.
How the Trust is Managed
JENNISON managed approximately $62 billion in assets as of December 31, 2001. Jennison has served as an investment adviser since 1969 and has advised mutual funds since 1990. Jennison's address is 466 Lexington Avenue, New York, NY 10017.
SPIROS "SIG" SEGALAS and KATHLEEN MCCARRAGHER have been co-portfolio managers for the segment of the Fund's assets advised by Jennison since the Fund's inception. Mr. Segalas has been in the investment business for over 41 years and has managed equity portfolios for investment companies since 1990. He was a founding member of Jennison in 1969 and currently serves as its Director, President and Chief Investment Officer. Ms. McCarragher is a Director and Executive Vice President of Jennison and is also Jennison's Domestic Equity Investment Strategist. She joined Jennison in 1998 after a 17-year investment career, including positions at Weiss, Peck & Greer, L.L.C. (1992 to 1998) as Managing Director and Director of Large Cap Growth Equities and State Street Research & Management Company, where she was a portfolio manager and a member of the Investment Committee.
NEW ERA GROWTH FUND
MASSACHUSETTS FINANCIAL SERVICES COMPANY (MFS) and JENNISON are the Fund's
Advisers.
MFS is America's oldest mutual fund organization. MFS and its predecessor organizations have a history of money management dating from 1924 and the founding of the first mutual fund, Massachusetts Investors Trust. Net assets under the management of the MFS organization were approximately $135 billion as of March 31, 2002. MFS is located at 500 Boylston Street, Boston, MA 02116.
JOHN W. BALLEN and DALE A. DUTILE have been co-portfolio managers for the segment of the Fund advised by MFS since the Fund's inception. Mr. Ballen, President and a member of the Management Committee and Board of Directors of MFS, supervises the management of the MFS segment of the Fund. He joined MFS in 1984. Mr. Dutile, a portfolio manager of the MFS Emerging Growth Fund since February 2000, has day-to-day responsibility for the management of the MFS segment of the Fund. He joined MFS in 1994.
All equity portfolio managers begin their careers at MFS as research analysts. MFS's portfolio managers are supported by an investment staff of over 100 professionals utilizing MFS Original Research(R), a global, company-oriented, bottom-up process of selecting securities.
How the Trust is Managed
JENNISON is described above.
SUSAN HIRSCH, an Executive Vice President of Jennison since August 2000, has served as the portfolio manager for the segment of the Fund advised by Jennison since the Fund's inception. Ms. Hirsch joined PIM, an affiliate of Jennison, in July 1996. Before that she was employed by Lehman Brothers Global Asset Management from 1988 to 1996. Ms. Hirsch was named as an Institutional Investor All-America Research Team Analyst for small growth stocks in 1991, 1992 and 1993.
FOCUSED VALUE FUND
DAVIS and SALOMON BROTHERS ASSET MANAGEMENT INC. (SALOMON BROTHERS) are the
Fund's Advisers.
DAVIS, 2949 Elvira Road, Suite 101, Tucson, AZ 85706, has served as investment adviser for all of the Davis Funds, other mutual funds, and other institutional clients since February 1969. As of December 31, 2001, Davis managed approximately $41.8 billion in net assets.
CHRISTOPHER C. DAVIS and KENNETH CHARLES FEINBERG have served as co-portfolio managers for the segment of the Fund's assets managed by Davis since the Fund's inception. Mr. Davis is President of Davis New York Venture Fund, Inc. and has co-managed that fund since October 1995. He also manages or co-manages other equity funds advised by Davis. Mr. Feinberg has served as a co-manager of Davis New York Venture Fund since May 1998. He also manages or co-manages other equity funds advised by Davis. He has been a research analyst at Davis since December 1994.
SALOMON BROTHERS, a wholly owned subsidiary of Citigroup, Inc., is located at 750 Washington Boulevard, 11th Floor, Stamford, CT 06901. Together with its affiliates, Salomon Brothers provides a broad range of fixed-income and equity investment advisory services to various entities located throughout the world and managed approximately $34 billion in assets as of December 31, 2001.
ROSS S. MARGOLIES and JOHN B. CUNNINGHAM, CFA, have served as co-portfolio managers for the segment of the Fund's assets managed by Salomon Brothers since the Fund's inception. Mr. Margolies, a Managing Director of Salomon Brothers, has managed or co-managed the Salomon Brothers Capital Fund since January 1995. Mr. Cunningham, a Managing Director and equity analyst with Salomon Brothers, has managed or co-managed the Salomon Brothers Investors Value Fund since September 1997. He joined Salomon Brothers in January 1995.
How the Trust is Managed
DISTRIBUTOR
Prudential Investment Management Services LLC (PIMS) distributes each Fund's shares under a Distribution Agreement with the Trust. Each Fund has Distribution and Service Plans under Rule 12b-1 under the Investment Company Act. Under the Plans and the Distribution Agreement, PIMS pays the expenses of distributing each Fund's Class A, B, C and Z shares and provides certain shareholder support services. Each Fund pays distribution and other fees to PIMS as compensation for its services for each class of shares other than Class Z. These fees--known as 12b-1 fees--are shown in the "Fees and Expenses" tables.
Investors who buy shares of the Funds should be aware of some important tax issues. For example, each Fund distributes DIVIDENDS of ordinary income and any realized net CAPITAL GAINS to shareholders. These distributions are subject to taxes, unless you hold your shares in a 401(k) plan, an Individual Retirement Account (IRA) or some other qualified or tax-deferred plan or account. Dividends and distributions from a Fund also may be subject to state and local income taxes.
Also, if you sell shares of a Fund for a profit, you may have to pay capital gains taxes on the amount of your profit, again unless you hold your shares in a qualified or tax-deferred plan or account.
The following briefly discusses some of the important federal tax issues you should be aware of, but is not meant to be tax advice. For tax advice, please speak with your tax adviser.
DISTRIBUTIONS
Each Fund distributes DIVIDENDS of any net investment income to shareholders--typically once a year. For example, if a Fund owns ACME Corp. stock and the stock pays a dividend, the Fund will pay out a portion of this dividend to its shareholders, assuming the Fund's income is more than its costs and expenses. The dividends you receive from a Fund will be taxed as ordinary income whether or not they are reinvested in the Fund.
Each Fund also distributes realized net CAPITAL GAINS to shareholders--typically once a year. Capital gains are generated when a Fund sells its assets for a profit. For example, if a Fund bought 100 shares of ACME Corp. stock for a total of $1,000 and more than one year later sold the shares for a total of $1,500, the Fund has net long-term capital gains of $500, which it will pass on to shareholders (assuming the Fund's total gains are greater than any losses it may have). Capital gains are taxed differently depending on how long the Fund holds the security--if a security is held more than one year before it is sold, LONG-TERM capital gains are taxed at rates of up to 20%, but if the security is held one year or less, SHORT-TERM capital gains are taxed at ordinary income rates of up to 38.6%. Different rates apply to corporate shareholders.
For your convenience, a Fund's distributions of dividends and capital gains are AUTOMATICALLY REINVESTED in the Fund without any sales charge. If you ask us to pay the distributions in cash, we will send you a check if your
account is with the Transfer Agent. Otherwise, if your account is with a broker, you will receive a credit to your account. Either way, the distributions may be subject to taxes, unless your shares are held in a qualified or tax-deferred plan or account. For more information about automatic reinvestment and other shareholder services, see "Step 4: Additional Shareholder Services" in the next section.
TAX ISSUES
FORM 1099
Every year, you will receive a Form 1099, which reports the amount of dividends and capital gains we distributed to you during the prior year. If you own shares of a Fund as part of a qualified or tax-deferred plan or account, your taxes are deferred, so you will not receive a Form 1099. However, you will receive a Form 1099 when you take any distributions from your qualified or tax-deferred plan or account.
Fund distributions are generally taxable to you in the calendar year in which they are received, except when we declare certain dividends in the fourth quarter and actually pay them in January of the following year. In such cases, the dividends are treated as if they were paid on December 31 of the prior year. Corporate shareholders are generally eligible for the 70% dividends-received deduction for certain dividends.
WITHHOLDING TAXES
If federal tax law requires you to provide the Fund with your taxpayer identification number and certifications as to your tax status, and you fail to do this, or if you are otherwise subject to backup withholding, we will withhold and pay to the U.S. Treasury a portion (currently 30%, but declining to 28% by 2006) of your distributions and sale proceeds. Dividends of net investment income and net short-term capital gains paid to a nonresident foreign shareholder generally will be subject to a U.S. withholding tax of 30%. This rate may be lower, depending on any tax treaty the U.S. may have with the shareholder's country.
IF YOU PURCHASE JUST BEFORE RECORD DATE
If you buy shares of a Fund just before the record date (the date for a distribution that determines who receives the distribution), we will pay that distribution to you. As explained above, the distribution may be subject to ordinary income or capital gains taxes. You may think you've done well since you bought shares one day and soon thereafter received a distribution. That is not so because when dividends are paid out, the value of each share of the Fund decreases by the amount of the dividend to reflect the payout, although this may not be apparent because the value of each share of the Fund also will be affected by market changes, if any. The distribution you receive makes up for the decrease in share value. However, the timing of your purchase does mean that part of your investment came back to you as taxable income.
QUALIFIED AND TAX-DEFERRED RETIREMENT PLANS
Retirement plans and accounts allow you to defer paying taxes on investment
income and capital gains. Contributions to these plans may also be tax
deductible, although distributions from these plans generally are taxable. In
the case of Roth IRA accounts, contributions are not tax deductible, but
distributions from the plan may be tax-free.
IF YOU SELL OR EXCHANGE YOUR SHARES
If you sell any shares of a Fund for a profit, you have REALIZED A CAPITAL GAIN, which is subject to tax unless you hold shares in a qualified or tax- deferred plan or account. The amount of tax you pay depends on how long
--------- you owned your shares and
when you bought them. If
[GRAPHIC] you sell shares of a Fund
for a loss, you may have a
capital loss, which you may
--------- use to offset certain capital
gains you have.
|
If you sell shares and realize a loss, you will not be permitted to use the loss to the extent you replace the shares (including pursuant to the reinvestment of a dividend) within a 61-day period (beginning 30 days before the sale of the shares). If you acquire shares of a Fund and sell your
shares within 90 days, you may not be allowed to include certain charges incurred in acquiring the shares for purposes of calculating gain or loss realized upon the sale of the shares.
Exchanging your shares of a Fund for the shares of another Strategic Partners /SM/ mutual fund is considered a sale for tax purposes. In other words, it's a TAXABLE EVENT. Therefore, if the shares you exchanged have increased in value since you purchased them, you have capital gains, which are subject to the taxes described above.
Any gain or loss you may have from selling or exchanging Fund shares will not be reported on Form 1099; however, proceeds from the sale or exchange will be reported on Form 1099-B. Therefore, unless you hold your shares in a qualified or tax-deferred plan or account, you or your financial adviser should keep track of the dates on which you buy and sell--or exchange--Fund shares, as well as the amount of any gain or loss on each transaction. For tax advice, please see your tax adviser.
AUTOMATIC CONVERSION OF CLASS B SHARES
We have obtained a legal opinion that the conversion of Class B shares into
Class A shares--which happens automatically approximately seven years after
purchase -- is not a "taxable event" because it does not involve an actual sale
of your Class B shares. This opinion, however, is not binding on the Internal
Revenue Service (IRS). For more information about the automatic conversion of
Class B shares, see "Class B Shares Convert to Class A Shares After
Approximately Seven Years" in the next section.
HOW TO BUY SHARES
STEP 1: OPEN AN ACCOUNT
If you don't have an account with a securities firm that is permitted to buy or sell shares of the Funds for you, call Prudential Mutual Fund Services LLC (PMFS), at (800) 225-1852, or contact:
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: INVESTMENT SERVICES
P.O. BOX 8179
PHILADELPHIA, PA 19101
You may purchase shares by check or wire. We do not accept cash or money orders. To purchase by wire, call the number above to obtain an application. After PMFS receives your completed application, you will receive an account number. We have the right to reject any purchase order (including an exchange into a Fund) or suspend or modify a Fund's sale of its shares.
STEP 2: CHOOSE A SHARE CLASS
Individual investors can choose among Class A, Class B, Class C and Class Z shares of the Funds, although Class Z shares are available only to a limited group of investors.
Multiple share classes let you choose a cost structure that better meets your needs. With Class A shares, you pay the sales charge at the time of purchase, but the operating expenses each year are lower than the expenses of Class B and Class C shares. The Class A CDSC is waived for all Class A shareholders other than those who purchase shares from certain broker-dealers not affiliated with Prudential. With Class B shares, you only pay a sales charge if you sell your shares within six years (that is why it is called a contingent deferred sales charge or CDSC), but the operating expenses each year are higher than Class A share expenses. With Class C shares, you pay a 1% front-end sales charge and a 1% CDSC if you sell within 18 months of purchase, but the operating expenses are also higher than the expenses for Class A shares.
When choosing a share class, you should consider the following:
. The amount of your investment
. The length of time you expect to hold the shares and the impact of varying
distribution fees. Over time, the fees will increase the cost of your
investment and may cost you more than paying other types of sales charges
Exchange Shares of the Funds
. The different sales charges that apply to each share class--Class A's
front-end sales charge vs. Class B's CDSC vs. Class C's low front-end
sales charge and low CDSC
. Whether you qualify for any reduction or waiver of sales charges
. The fact that, if you are purchasing Class B shares in an amount of $100,000 or more, you should consult with your financial adviser to determine whether other share classes are more beneficial given your circumstances
. The fact that Class B shares automatically convert to Class A shares
approximately seven years after purchase
. Whether you qualify to purchase Class Z shares.
See "How to Sell Your Shares" for a description of the impact of CDSCs.
Share Class Comparison. Use this chart to help you compare the Funds' different share classes. The discussion following this chart will tell you whether you are entitled to a reduction or waiver of any sales charges.
CLASS A CLASS B CLASS C CLASS Z
Minimum purchase $1,000 $1,000 $2,500 None
amount/1/
Minimum amount for $100 $100 $100 None
subsequent purchases/1/
Maximum initial sales 5% of the public None 1% of the public None
charge offering price offering price/2/
Contingent Deferred Sales 1%/4/ If sold during: 1% on sales None
Charge (CDSC)/3/ Year 1 5% made within 18
Year 2 4% months of
Year 3 3% purchase/2/
Year 4 2%
Years 5/6 1%
Year 7 0%
Annual distribution .30 of 1%; 1% 1% None
(12b-1) and service fees (.25 of 1%
shown as a percentage of currently)
average net assets/5/
|
1 The minimum investment requirements do not apply to certain retirement and employee savings plans and custodial accounts for minors. The minimum initial and subsequent investment for purchases made through the Automatic Investment Plan is $50. For more information, see "Additional Shareholder Services--Automatic Investment Plan."
2 1.01% of the net amount invested.
3 For more information about the CDSC and how it is calculated, see "How to Sell Your Shares--Contingent Deferred Sales Charge (CDSC)."
4 Investors who purchase $1 million or more of Class A shares and sell shares within 12 months of purchase are subject to 1% CDSC. This change is waived for all such Class A shareholders other than those who purchase their shares through certain broker-dealers that are not affiliated with Prudential.
5 These distribution and service fees are paid from each Fund's assets on a continuous basis. The service fee for Class A, Class B and Class C shares is .25 of 1%. The distribution fee for Class A shares is limited to .30 of 1% (including the .25 of 1% service fee). Class B and Class C shares pay a distribution fee (in addition to the service fee) of .75 of 1%. For the fiscal years ending 7-31-02 and 7-31-03, the Distributor has contractually agreed to reduce its distribution and service (12b-1) fees for Class A shares to .25 of 1% of the average daily net assets of the Class A shares.
Exchange Shares of the Funds
REDUCING OR WAIVING CLASS A'S INITIAL SALES CHARGE
The following describes the different ways investors can reduce or avoid paying
Class A's initial sales charge.
Increase the Amount of Your Investment. You can reduce Class A's sales charge by increasing the amount of your investment. This table shows how the sales charge decreases as the amount of your investment increases.
SALES CHARGE AS % SALES CHARGE AS % DEALER
AMOUNT OF PURCHASE OF OFFERING PRICE OF AMOUNT INVESTED REALLOWANCE
Less than $25,000 5.00% 5.26% 4.75%
$25,000 to $49,999 4.50% 4.71% 4.25%
$50,000 to $99,999 4.00% 4.17% 3.75%
$100,000 to $249,999 3.25% 3.36% 3.00%
$250,000 to $499,999 2.50% 2.56% 2.40%
$500,000 to $999,999 2.00% 2.04% 1.90%
$1 million and above* None None None
|
*If you invest $1 million or more, you can buy only Class A shares, unless you qualify to buy Class Z shares. If you purchase $1 million or more of Class A shares, you will be subject to a 1% CDSC for shares redeemed within 12 months of purchase. This charge is waived for all such Class A shareholders other than those who purchase their shares through certain broker-dealers that are not affiliated with Prudential.
To satisfy the purchase amounts above, you can:
. Invest with an eligible group of related investors
. Buy Class A shares of two or more Strategic Partners mutual funds at the
same time
. Use your RIGHTS OF ACCUMULATION, which allow you to combine (1) the
current value of shares of Strategic Partners mutual funds that you
already own, (2) the value of money market shares you have received for
shares of those funds in an exchange transaction, and (3) the value of the
shares you are purchasing for purposes of determining the applicable sales
charge (note: you must notify the Transfer Agent at the time of purchase
if you qualify for Rights of Accumulation)
. Sign a LETTER OF INTENT, stating in writing that you or an eligible group of related investors will purchase a certain amount of shares in a Fund and other Strategic Partners mutual funds within 13 months.
The Distributor may reallow Class A's sales charge to dealers.
Exchange Shares of the Funds
Benefit Plans. Benefit Plans can avoid Class A's initial sales charge if the Benefit Plan has existing assets of at least $1 million or 250 eligible employees or participants. For these purposes, a Benefit Plan is a pension, profit-sharing or other employee benefit plan qualified under Section 401 of the Internal Revenue Code, a deferred compensation or annuity plan under Sections 403(b) and 457 of the Internal Revenue Code, a rabbi trust, or a nonqualified deferred compensation plan.
Mutual Fund Programs. Waivers are also available to investors in certain programs sponsored by brokers, investment advisers and financial planners who have agreements with the Distributor relating to:
. Mutual fund "wrap" or asset allocation programs where the sponsor places
Fund trades and charges its clients a management, consulting or other fee
for its services, or
. Mutual fund "supermarket" programs where the sponsor links its clients'
accounts to a master account in the sponsor's name and the sponsor charges
a fee for its services.
Broker-dealers, investment advisers or financial planners sponsoring these mutual fund programs may offer their clients more than one class of shares in the Funds in connection with different pricing options for their programs. Investors should consider carefully any separate transaction and other fees charged by these programs in connection with investing in each available share class before selecting a share class.
Other Types of Investors. Other investors pay no sales charge, including certain officers, employees or agents of the Manager and its affiliates, the Advisers of Strategic Partners mutual funds and registered representatives and employees of brokers that have entered into dealer agreements with the Distributor. To qualify for a reduction or waiver of the sales charge, you must notify the Transfer Agent or your broker at the time of purchase. For more information, see the SAI, "Purchase, Redemption and Pricing of Fund Shares--Reduction and Waiver of Initial Sales Charge--Class A Shares."
WAIVING CLASS C'S INITIAL SALES CHARGE
Benefit Plans. Benefit Plans (as defined above) may purchase Class C shares
without paying an initial sales charge.
Exchange Shares of the Funds
Investment of Redemption Proceeds from Other Investment Companies. The initial sales charge will be waived for purchases of Class C shares if the purchase is made with money from the redemption of shares of any unaffiliated investment company. These purchases must be made within 60 days of the redemption. This waiver is not available to investors who purchase shares directly from the Transfer Agent. If you are entitled to the waiver, you must notify either the Transfer Agent or your broker, who may require any supporting documents they consider appropriate.
Other. Investors who purchase Class C shares through certain broker-dealers that are not affiliated with Prudential may purchase Class C shares without paying the initial sales charge.
QUALIFYING FOR CLASS Z SHARES
Class Z shares of the Funds can be purchased by any of the following:
. Any Benefit Plan, as defined above, and certain nonqualified plans, provided the Benefit Plan--in combination with other plans sponsored by the same employer or group of related employers--has at least $50 million in defined contribution assets,
. Current and former Trustees of the Strategic Partners mutual funds, including the Trust,
. The Manager or an Adviser or one of their respective affiliates, with an investment of $10 million or more, or
. Qualified state tuition programs (529 plans).
PAYMENT TO THIRD PARTIES
In connection with the sale of shares, the Manager, the Distributor or one of their affiliates may pay brokers, financial advisers and other persons a commission of up to 4% of the purchase price for Class B shares, up to 2% of the purchase price for Class C shares and a finder's fee for Class A or Class Z shares from their own resources based on a percentage of the net asset value of shares sold or otherwise. The Distributor or one of its affiliates may make ongoing payments, from its own resources, to brokers, financial advisers and other persons for providing recordkeeping or otherwise facilitating the maintenance of shareholder accounts.
CLASS B SHARES CONVERT TO CLASS A SHARES AFTER APPROXIMATELY SEVEN YEARS If you buy Class B shares and hold them for approximately seven years, we will automatically convert them into Class A shares without charge. At that
Exchange Shares of the Funds
time, we will also convert any Class B shares that you purchased with reinvested dividends and other distributions. Since the distribution and service (12b-1) fees for Class A shares are lower than for Class B shares, converting to Class A shares lowers your Fund expenses.
When we do the conversion, you will get fewer Class A shares than the number of converted Class B if the price of the Class A shares is higher than the price of Class B shares. The total dollar value will be the same, so you will not have lost any money by getting fewer Class A shares. We do the conversions quarterly, not on the anniversary date of your purchase. For more information, see the SAI, "Purchase, Redemption and Pricing of Fund Shares--Conversion Feature--Class B Shares."
STEP 3: UNDERSTANDING THE PRICE YOU'LL PAY
The price you pay for each share of a Fund is based on the share value. The share value of a mutual fund--known as the NET ASSET VALUE or NAV--is determined by a simple calculation: it's the total value of a Fund (assets minus liabilities) divided by the total number of shares outstanding. For
---------------------------- example, if the value of the MUTUAL FUND SHARES investments held by Fund XYZ THE NAV OF MUTUAL FUND SHARES (minus its liabilities) is $1,000 and CHANGES EVERY DAY BECAUSE THE VALUE there are 100 shares of Fund XYZ OF A FUND'S PORTFOLIO CHANGES owned by shareholders, the price of CONSTANTLY. FOR EXAMPLE, IF FUND XYZ one share of the fund--or the HOLDS ACME CORP. STOCK IN ITS NAV--is $10 ($1,000 divided by PORTFOLIO AND THE PRICE OF ACME 100). STOCK GOES UP WHILE THE VALUE OF THE Each Fund's portfolio securities FUND'S OTHER HOLDINGS REMAINS THE are valued based upon market SAME AND EXPENSES DON'T CHANGE, quotations or, if not readily available, THE NAV OF FUND XYZ WILL INCREASE. at fair value as determined in good ---------------------------- |
faith under procedures established by the Board. A Fund also may use fair value pricing if it determines that a market quotation is not reliable based, among other things, on events that occur after the quotation is derived or after the close of the primary market on which the security is traded, but before the time that the Fund's NAV is determined. This use of fair value pricing most commonly occurs with securities that are primarily traded outside the U.S., but also may occur with U.S.-traded securities. The fair value of a portfolio security that a Fund uses to determine its NAV may differ
Exchange Shares of the Funds
from the security's quoted or published price. For purposes of computing a Fund's NAV, we will value the Fund's futures contracts 15 minutes after the close of regular trading on the New York Stock Exchange (NYSE). Except when we fair value securities or as noted below, we normally value each foreign security held by a Fund as of the close of the security's primary market.
We determine each Fund's NAV once each business day at the close of regular trading on the NYSE, usually 4:00 p.m. New York time. The NYSE is closed on most national holidays and Good Friday. We do not price, and you will not be able to purchase or redeem, a Fund's shares on days when the NYSE is closed but the primary markets for the Fund's foreign securities are open, even though the value of these securities may have changed. Conversely, a Fund will ordinarily price its shares, and you may purchase and redeem shares, on days that the NYSE is open but foreign securities markets are closed. We may not determine a Fund's NAV on days when we have not received any orders to purchase, sell or exchange Fund shares, or when changes in the value of the Fund's portfolio do not materially affect its NAV.
Most national newspapers report the NAVs of larger mutual funds, which allows investors to check the price of those funds daily.
WHAT PRICE WILL YOU PAY FOR SHARES OF THE FUND?
For Class A and Class C shares, you'll pay the public offering price, which is
the NAV next determined after we receive your order to purchase, plus an
initial sales charge (unless you're entitled to a waiver). For Class B and
Class Z shares, you will pay the NAV next determined after we receive your
order to purchase (remember, there are no up-front sales charges for these
share classes). Your broker may charge you a separate or additional fee for
purchases of shares.
Unless regular trading on the NYSE closes before 4:00 p.m., your order to
purchase must be received by 4:00 p.m. New York time in order to receive that
day's NAV. In the event that regular trading on the NYSE closes before 4:00
p.m. New York time, you will receive the following day's NAV if your order to
purchase is received after the close of regular trading on the NYSE.
STEP 4: ADDITIONAL SHAREHOLDER SERVICES
As a Fund shareholder, you can take advantage of the following services and
privileges:
Exchange Shares of the Funds
Automatic Reinvestment. As we explained in the "Fund Distributions and Tax Issues" section, each Fund pays out -- or distributes -- its net investment income and capital gains to all shareholders. For your convenience, we will automatically reinvest your distributions in a Fund at NAV without any sales charge. If you want your distributions paid in cash, you can indicate this preference on your application, notify your broker or notify the Transfer Agent in writing (at the address below) at least five business days before the date we determine who receives dividends.
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: ACCOUNT MAINTENANCE
P.O. BOX 8159
PHILADELPHIA, PA 19101
Automatic Investment Plan. You can make regular purchases of a Fund for as little as $50 by having the funds automatically withdrawn from your bank or brokerage account at specified intervals.
Systematic Withdrawal Plan. A systematic withdrawal plan is available that will provide you with monthly, quarterly, semi-annual or annual redemption checks. Remember, the sale of Class A (in certain cases), Class B and Class C shares may be subject to a CDSC. The Systematic Withdrawal Plan is not available to participants in certain retirement plans. Please contact PMFS at (800) 225-1852 for more details.
Reports to Shareholders. Every year we will send you an annual report (along with an updated prospectus) and a semi-annual report, which contain important financial information about the Funds. To reduce Fund expenses, we may send one annual shareholder report, one semi-annual shareholder report and one annual prospectus per household, unless you instruct us or your broker otherwise.
HOW TO SELL YOUR SHARES
You can sell your shares of the Funds for cash (in the form of a check) at any time, subject to certain restrictions.
When you sell shares of a Fund -- also known as redeeming your shares -- the price you will receive will be the NAV next determined after the
Exchange Shares of the Funds
Transfer Agent, the Distributor or your broker receives your order to sell. If your broker holds your shares, your broker must receive your order to sell by 4:00 p.m. New York time to process the sale on that day. In the event that regular trading on the NYSE closes before 4:00 p.m. New York time, you will receive the following day's NAV if your order to sell is received after the close of regular trading on the NYSE. Otherwise contact:
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: REDEMPTION SERVICES
P.O. BOX 8149
PHILADELPHIA, PA 19101
Generally, we will pay you for the shares that you sell within seven days after the Transfer Agent, the Distributor or your broker receives your sell order. If you hold shares through a broker, payment will be credited to your account. If you are selling shares you recently purchased with a check, we may delay sending you the proceeds until your check clears, which can take up to 10 days from the purchase date. You can avoid delay if you purchase shares by wire, certified check or cashier's check. Your broker may charge you a separate or additional fee for sales of shares.
RESTRICTIONS ON SALES
There are certain times when you may not be able to sell shares of a Fund, or when we may delay paying you the proceeds from a sale. As permitted by the Securities and Exchange Commission, this may happen only during unusual market conditions or emergencies when the Fund can't determine the value of its assets or sell its holdings. For more information, see the SAI, "Purchase, Redemption and Pricing of Fund Shares -- Sale of Shares."
If you hold your shares directly with the Transfer Agent, you will need to have the signature on your sell order signature guaranteed by an "eligible financial institution" if:
. You are selling more than $100,000 of shares,
. You want the redemption proceeds made payable to someone that is not in our records,
. You want the redemption proceeds sent to some place that is not in our records, or
. You are a business or a trust.
Exchange Shares of the Funds
An "eligible guarantor institution" includes any bank, broker-dealer, savings association or credit union. For more information, see the SAI, "Purchase, Redemption and Pricing of Fund Shares -- Sale of Shares -- Signature Guarantee."
CONTINGENT DEFERRED SALES CHARGE (CDSC)
If you sell Class B shares within six years of purchase or Class C shares within 18 months of purchase, you will have to pay a CDSC. In addition, if you purchase $1 million or more of Class A shares through certain broker-dealers that are not affiliated with Prudential, you are subject to a 1% CDSC for shares redeemed within 12 months of purchase. To keep the CDSC as low as possible, we will sell amounts representing shares in the following order:
. Amounts representing shares you purchased with reinvested dividends and distributions,
. Amounts representing the increase in NAV above the total amount of payments for shares made during the past 12 months for Class A shares (in certain cases), six years for Class B shares and 18 months for Class C shares, and
. Amounts representing the cost of shares held beyond the CDSC period (12 months for Class A shares (in certain cases), six years for Class B shares and 18 months for Class C shares).
Since shares that fall into any of the categories listed above are not
subject to the CDSC, selling them first helps you to avoid -- or at least
minimize -- the CDSC.
Having sold the exempt shares first, if there are any remaining shares that
are subject to the CDSC, we will apply the CDSC to amounts representing the
cost of shares held for the longest period of time within the applicable CDSC
period.
As we noted before in the "Share Class Comparison" chart, the CDSC for Class B shares is 5% in the first year, 4% in the second, 3% in the third, 2% in the fourth and 1% in the fifth and sixth years. The rate decreases on the first day of the month following the anniversary date of your purchase, not on the anniversary date itself. The CDSC is 1% for Class C shares -- which is applied to shares sold within 18 months of purchase. Class A shares are subject to a CDSC, in certain cases, as previously noted, of 1% that is applied to Class A shares sold within 12 months of purchase. The Class A
Exchange Shares of the Funds
CDSC is waived for all such Class A investors other than those who purchase their shares from certain broker-dealers that are not affiliated with Prudential. For Class A, Class B and Class C shares, the CDSC is calculated based on the lesser of the original purchase price or the redemption proceeds. For purposes of determining how long you've held your shares, all purchases during the month are grouped together and considered to have been made on the last day of the month.
The holding period for purposes of determining the applicable CDSC will be calculated from the first day of the month after initial purchase, excluding any time shares were held in a money market fund.
WAIVER OF THE CDSC -- CLASS B SHARES
The CDSC will be waived if the Class B shares are sold:
. After a shareholder is deceased or disabled (or, in the case of a trust
account, the death or disability of the grantor). This waiver applies to
individual shareholders, as well as shares held in joint tenancy, provided
the shares were purchased before the death or disability
. To provide for certain distributions -- made without IRS penalty -- from a
tax-deferred retirement plan, IRA or Section 403(b) custodial account
. On certain sales effected through a Systematic Withdrawal Plan.
For more information on the above and other waivers, see the SAI, "Purchase, Redemption and Pricing of Fund Shares -- Waiver of Contingent Deferred Sales Charge -- Class B Shares."
WAIVER OF THE CDSC -- CLASS C SHARES
Benefit Plans. The CDSC will be waived on redemptions from Benefit Plans
holding shares through a broker for which the broker provides administrative or
recordkeeping services.
REDEMPTION IN KIND
If the sales of Fund shares you make during any 90-day period reach the lesser of $250,000 or 1% of the value of a Fund's net assets, we can then give you securities from the Fund's portfolio instead of cash. If you want to sell the securities for cash, you would have to pay the costs charged by a broker.
Exchange Shares of the Funds
SMALL ACCOUNTS
If you make a sale that reduces your account value to less than $500, we may sell the rest of your shares (without charging any CDSC) and close your account. We would do this to minimize Fund expenses paid by other shareholders. We will give you 60 days' notice, during which time you can purchase additional shares to avoid this action. This involuntary sale does not apply to shareholders who own their shares as part of a 401(k) plan, an IRA or some other qualified or tax-deferred plan or account.
90-DAY REPURCHASE PRIVILEGE
After you redeem your shares, you have a 90-day period during which you may
reinvest any of the redemption proceeds in shares of the same Fund and account
without paying an initial sales charge. Also, if you paid a CDSC when you
redeemed your shares, we will credit your account with the appropriate number
of shares to reflect the amount of the CDSC you paid. In order to take
advantage of this one-time privilege, you must notify the Transfer Agent or
your broker at the time of the repurchase. See the SAI, "Purchase, Redemption
and Pricing of Fund Shares -- Sale of Shares."
RETIREMENT PLANS
To sell shares and receive a distribution from a retirement account, call your
broker or the Transfer Agent for a distribution request form. There are special
distribution and income tax withholding requirements for distributions from
retirement plans and you must submit a withholding form with your request to
avoid delay. If your retirement plan account is held for you by your employer
or plan trustee, you must arrange for the distribution request to be signed and
sent by the plan administrator or trustee. For additional information, see the
SAI.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares of a Fund for shares of the same class in any other Strategic Partners mutual fund, as well as shares of Special Money Market Fund, Inc. (Special Money Fund), if you satisfy the minimum investment requirements. For example, you can exchange Class A shares of a Fund for Class A shares of another Strategic Partners mutual fund, but you can't exchange Class A shares for Class B, Class C or Class Z shares. Shares of the Fund also may be exchanged into Strategic Partners shares of Special Money Fund. After an exchange, at redemption, the CDSC will be calculated
Exchange Shares of the Funds
from the first day of the month after initial purchase, excluding any time shares were held in a money market fund. We may change the terms of the exchange privilege after giving you 60 days' notice.
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: EXCHANGE PROCESSING
P.O. BOX 8157
PHILADELPHIA, PA 19101
There is no sales charge for exchanges. However, if you exchange -- and then
sell -- Class B shares within approximately six years of your original purchase
or Class C shares within 18 months of your original purchase, you must still
pay the applicable CDSC. If you have exchanged Class B or Class C shares into a
money market fund, the time you hold the shares in the money market fund will
not be counted in calculating the required holding periods for CDSC liability.
Remember, as we explained in the section entitled "Fund Distributions and
Tax Issues -- If You Sell or Exchange Your Shares," exchanging shares is
considered a sale for tax purposes. Therefore, if the shares you exchange are
worth more than the amount that you paid for them, you may have to pay capital
gains tax. For additional information about exchanging shares, see the SAI,
"Shareholder Investment Account -- Exchange Privilege."
FREQUENT TRADING
Frequent trading of Fund shares in response to short-term fluctuations in the market -- also known as "market timing" -- may make it very difficult to manage the Fund's investments. When market timing occurs, a Fund may have to sell portfolio securities to have the cash necessary to redeem the market timer's shares. This can happen at a time when it is not advantageous to sell any securities, so the Fund's performance may be hurt. When large dollar amounts are involved, market timing can also make it difficult to use long-term investment strategies because we cannot predict how much cash a Fund will have to invest. When, in our opinion, such activity would have a disruptive effect on portfolio management, each Fund reserves the right to refuse purchase orders and exchanges into the Fund by any person, group or commonly controlled account. The decision may be based upon dollar
Exchange Shares of the Funds
amount, volume or frequency of trading. Each Fund will notify a market timer of rejection of an exchange or purchase order. If a Fund allows a market timer to trade Fund shares, it may require the market timer to enter into a written agreement to follow certain procedures and limitations.
TELEPHONE REDEMPTIONS OR EXCHANGES
You may redeem or exchange your shares in any amount by calling the Trust at
(800) 225-1852 before 4:00 p.m. New York time to receive a redemption or
exchange amount based on that day's NAV. In the event that regular trading on
the NYSE closes before 4:00 p.m. New York time, you will receive the following
day's NAV if your order to sell or exchange is received after the close of
regular trading on the NYSE.
The Transfer Agent will record your telephone instructions and request specific account information before redeeming or exchanging shares. A Fund will not be liable if it follows instructions that it reasonably believes are made by the shareholder. If a Fund does not follow reasonable procedures, it may be liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, you may have difficulty
in redeeming or exchanging your shares by telephone. If this occurs, you should
consider redeeming or exchanging your shares by mail or through your broker.
The telephone redemption and exchange procedures may be modified or
terminated at any time. If this occurs, you will receive a written notice from
the Fund.
EXPEDITED REDEMPTION PRIVILEGE
If you have selected the Expedited Redemption Privilege, you may have your redemption proceeds sent directly to your bank account. Expedited redemption requests may be made by telephone or letter, must be received by the relevant Fund prior to 4:00 p.m. New York time, to receive a redemption amount based on that day's NAV and are subject to the terms and conditions regarding the redemption of shares. In the event that regular trading on the NYSE closes before 4:00 p.m. New York time, you will receive the following day's NAV if your order to sell is received after the close of regular trading on the NYSE. For more information, see "Purchase, Redemption and Pricing of Fund Shares -- Expedited Redemption Privilege" in the SAI. The Expedited Redemption Privilege may be modified or terminated at any time without notice.
The financial highlights below are intended to help you evaluate the financial performance of each Fund since its inception. The TOTAL RETURN in each chart represents the rate that a shareholder earned on an investment in that share class of a Fund, assuming reinvestment of all dividends and other distributions. The information is for each share class for the periods indicated.
A copy of the Trust's annual report is available upon request, at no charge, as described on the back cover of this prospectus.
FOCUSED GROWTH FUND
The financial highlights for the two fiscal periods ended February 28, 2002 were audited by PricewaterhouseCoopers LLP, independent accountants, whose report was unqualified.
CLASS A SHARES
CLASS A SHARES
JUNE 2, 2000/1/
YEAR ENDED THROUGH
PER SHARE OPERATING PERFORMANCE FEBRUARY 28, 2002 FEBRUARY 28, 2001
NET ASSET VALUE, BEGINNING OF PERIOD $7.30 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.06) (0.06)
Net realized and unrealized loss on
investment transactions (1.29) (2.64)
TOTAL FROM INVESTMENT OPERATIONS (1.35) (2.70)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $5.95 $ 7.30
TOTAL INVESTMENT RETURN/2/ (18.49)% (27.00)%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000) $27,630 $43,200
Average net assets (000) $34,765 $59,259
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution and service
(12b-1) fees 1.42% 1.57%/3/
Expenses, excluding distribution and service
(12b-1) fees 1.17% 1.32%/3/
Net investment loss (0.77)% (0.80)%/3/
FOR CLASS A, B, C AND Z SHARES:
Portfolio turnover 76% 116%/4/
--------------------------------------------------------------------------------
|
1 Commencement of investment operations.
2 Total investment return does not consider the effects of sales loads. Total investment return is calculated assuming a purchase of shares on the first day and a sale on the last day of each period reported. Total investment returns for periods of less than one full year are not annualized.
3 Annualized.
4 Not annualized.
FOCUSED GROWTH FUND
CLASS B SHARES
CLASS B SHARES
JUNE 2, 2000/1/
YEAR ENDED THROUGH
PER SHARE OPERATING PERFORMANCE FEBRUARY 28, 2002 FEBRUARY 28, 2001
NET ASSET VALUE, BEGINNING OF PERIOD $7.26 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.11) (0.10)
Net realized and unrealized loss on
investment transactions (1.28) (2.64)
TOTAL FROM INVESTMENT OPERATIONS (1.39) (2.74)
-------------------------------------------------------------- -----------------
NET ASSET VALUE, END OF PERIOD $5.87 $ 7.26
TOTAL INVESTMENT RETURN/2/ (19.15)% (27.40)%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000) $97,635 $137,671
Average net assets (000) $117,384 $164,779
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution and
service (12b-1) fees 2.17% 2.32%/3/
Expenses, excluding distribution and
service (12b-1) fees 1.17% 1.32%/3/
Net investment loss (1.52)% (1.56)%/3/
--------------------------------------------------------------------------------
|
1 Commencement of investment operations.
2 Total investment return does not consider the effects of sales loads. Total investment return is calculated assuming a purchase of shares on the first day and a sale on the last day of each period reported. Total investment returns for periods of less than one full year are not annualized.
3 Annualized.
4 Not annualized.
FOCUSED GROWTH FUND
CLASS C SHARES
CLASS C SHARES
JUNE 2, 2000/1/
YEAR ENDED THROUGH
PER SHARE OPERATING PERFORMANCE FEBRUARY 28, 2002 FEBRUARY 28, 2001
NET ASSET VALUE, BEGINNING OF PERIOD $7.26 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.11) (0.10)
Net realized and unrealized loss on
investment transactions (1.28) (2.64)
TOTAL FROM INVESTMENT OPERATIONS (1.39) (2.74)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $5.87 $ 7.26
TOTAL INVESTMENT RETURN /2/ (19.15)% (27.40)%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000) $63,966 $96,437
Average net assets (000) $80,074 $121,487
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution and service
(12b-1) fees 2.17% 2.32%/3/
Expenses, excluding distribution and service
(12b-1) fees 1.17% 1.32%/3/
Net investment loss (1.52)% (1.56)%/3/
--------------------------------------------------------------------------------
|
1 Commencement of investment operations.
2 Total investment return does not consider the effects of sales loads. Total investment return is calculated assuming a purchase of shares on the first day and a sale on the last day of each period reported. Total investment returns for periods of less than one full year are not annualized.
3 Annualized.
4 Not annualized.
FOCUSED GROWTH FUND
CLASS Z SHARES
CLASS Z SHARES
JUNE 2, 2000/1/
YEAR ENDED THROUGH
PER SHARE OPERATING PERFORMANCE FEBRUARY 28, 2002 FEBRUARY 28, 2001
NET ASSET VALUE, BEGINNING OF PERIOD $7.31 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.04) (0.04)
Net realized and unrealized loss on
investment transactions (1.30) (2.65)
TOTAL FROM INVESTMENT OPERATIONS (1.34) (2.69)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $5.97 $ 7.31
TOTAL INVESTMENT RETURN/2/ (18.33)% (26.90)%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000) $10,840 $15,574
Average net assets (000) $12,834 $22,544
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution and service
(12b-1) fees 1.17% 1.32%/3/
Expenses, excluding distribution and service
(12b-1) fees 1.17% 1.32%/3/
-Net investment loss (0.52)% (0.55)%/3/
--------------------------------------------------------------------------------
|
1 Commencement of investment operations.
2 Total investment return does not consider the effects of sales loads. Total investment return is calculated assuming a purchase of shares on the first day and a sale on the last day of each period reported. Total investment returns for periods of less than one full year are not annualized.
3 Annualized.
4 Not annualized.
NEW ERA GROWTH FUND
The financial highlights for the two fiscal periods ended February 28, 2002 were audited by PricewaterhouseCoopers LLP, independent accountants, whose report was unqualified.
CLASS A SHARES
CLASS A SHARES
NOVEMBER 22, 2000/1/
YEAR ENDED THROUGH
PER SHARE OPERATING PERFORMANCE FEBRUARY 28, 2002/4/ FEBRUARY 28, 2001
NET ASSET VALUE, BEGINNING OF PERIOD $9.05 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.09) (0.02)
Net realized and unrealized loss on
investments and foreign currencies (2.44) (0.93)
TOTAL FROM INVESTMENT OPERATIONS (2.53) (0.95)
NET ASSET VALUE, END OF PERIOD $6.52 $9.05
TOTAL INVESTMENT RETURN/2/ (27.96)% (9.50)%
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000) $32,440 $63,565
Average net assets (000) $47,807 $72,881
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution and
service (12b-1) fees 1.54% 1.64%/3/
Expenses, excluding distribution and
service (12b-1) fees 1.29% 1.39%/3/
Net investment loss (1.15)% (0.90)%/3/
FOR CLASS A, B, C AND Z SHARES:
Portfolio turnover rate/5/ 196% 62%
-------------------------------------------------------------------------------
|
1 Commencement of investment operations.
2 Total investment return does not consider the effects of sales loads. Total investment return is calculated assuming a purchase of shares on the first day and a sale on the last day of each period reported. Total investment returns for periods of less than one full year are not annualized.
3 Annualized.
4 Based on average shares outstanding during the year.
5 Not annualized for periods of less than one full year.
NEW ERA GROWTH FUND
CLASS B SHARES
CLASS B SHARES
NOVEMBER 22, 2000/1/
YEAR ENDED THROUGH
PER SHARE OPERATING PERFORMANCE FEBRUARY 28, 2002/4/ FEBRUARY 28, 2001
NET ASSET VALUE, BEGINNING OF PERIOD $9.04 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.15) (0.04)
Net realized and unrealized loss on
investments and foreign currencies (2.43) (0.92)
TOTAL FROM INVESTMENT OPERATIONS (2.58) (0.96)
NET ASSET VALUE, END OF PERIOD $6.46 $9.04
TOTAL INVESTMENT RETURN/2/ (28.54)% (9.60)%
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000) $68,825 $114,003
Average net assets (000) $91,189 $124,911
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution and
service (12b-1) fees 2.29% 2.39%/3/
Expenses, excluding distribution and
service (12b-1) fees 1.29% 1.39%/3/
Net investment loss (1.90)% (1.67)%/3/
-------------------------------------------------------------------------------
|
1 Commencement of investment operations.
2 Total investment return does not consider the effects of sales loads. Total investment return is calculated assuming a purchase of shares on the first day and a sale on the last day of each period reported. Total investment returns for periods of less than one full year are not annualized.
3 Annualized.
4 Based on average shares outstanding during the year.
NEW ERA GROWTH FUND
CLASS C SHARES
CLASS C SHARES
NOVEMBER 22, 2000/1/
YEAR ENDED THROUGH
PER SHARE OPERATING PERFORMANCE FEBRUARY 28, 2002/4/ FEBRUARY 28, 2001
NET ASSET VALUE, BEGINNING OF
PERIOD $9.04 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.15) (0.04)
Net realized and unrealized loss
on investments and foreign
currencies (2.43) (0.92)
TOTAL FROM INVESTMENT OPERATIONS (2.58) (0.96)
NET ASSET VALUE, END OF PERIOD $6.46 $9.04
TOTAL INVESTMENT RETURN/2/ (28.54)% (9.60)%
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000) $55,707 $100,163
Average net assets (000) $76,432 $110,152
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution
and service (12b-1) fees 2.29% 2.39%/3/
Expenses, excluding distribution
and service (12b-1) fees 1.29% 1.39%/3/
Net investment loss (1.90)% (1.67)%/3/
--------------------------------------------------------------------------
|
1 Commencement of investment operations.
2 Total investment return does not consider the effects of sales loads. Total investment return is calculated assuming a purchase of shares on the first day and a sale on the last day of each period reported. Total investment returns for periods of less than one full year are not annualized.
3 Annualized.
4 Based on average shares outstanding during the year.
NEW ERA GROWTH FUND
CLASS Z SHARES
CLASS Z SHARES
NOVEMBER 22, 2000/1/
YEAR ENDED THROUGH
PER SHARE OPERATING PERFORMANCE FEBRUARY 28, 2002/4/ FEBRUARY 28, 2001
NET ASSET VALUE, BEGINNING OF PERIOD $9.07 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.07) (0.02)
Net realized and unrealized loss on
investments and foreign currencies (2.46) (0.91)
TOTAL FROM INVESTMENT OPERATIONS (2.53) (0.93)
NET ASSET VALUE, END OF PERIOD $6.54 $9.07
TOTAL INVESTMENT RETURN/2/ (27.89)% (9.30)%
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000) $14,004 $36,565
Average net assets (000) $23,491 $43,658
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution and
service (12b-1) fees 1.29% 1.39%/3/
Expenses, excluding distribution and
service (12b-1) fees 1.29% 1.39%/3/
Net investment loss (0.89)% (0.65)%/3/
-------------------------------------------------------------------------------
|
1 Commencement of investment operations.
2 Total investment return does not consider the effects of sales loads. Total investment return is calculated assuming a purchase of shares on the first day and a sale on the last day of each period reported. Total investment returns for periods of less than one full year are not annualized.
3 Annualized.
4 Based on average shares outstanding during the year.
FOCUSED VALUE FUND
The financial highlights for the period ended February 28, 2002 were audited by PricewaterhouseCoopers LLP, independent accountants, whose report was unqualified.
CLASS A SHARES
CLASS A SHARES
MARCH 30, 2001(A)
THROUGH
PER SHARE OPERATING PERFORMANCE FEBRUARY 28, 2002
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05
Net realized and unrealized loss on investments (0.59)
TOTAL FROM INVESTMENT OPERATIONS (0.54)
-----------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.06)
NET ASSET VALUE, END OF PERIOD $9.40
TOTAL INVESTMENT RETURN: /(b)/ (5.44)%
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000) $39,418
Average net assets (000) $44,868
RATIOS TO AVERAGE NET ASSETS: /(c)/
Expenses, including distribution and service (12b-1) fees 1.49%
Expenses, excluding distribution and service (12b-1) fees 1.24%
Net investment income .51%
FOR CLASS A, B, C AND Z SHARES:
Portfolio turnover 65%
-----------------------------------------------------------------------------
|
(a) Commencement of investment operations.
(b) Total investment return does not consider the effects of sales loads. Total investment return is calculated assuming a purchase of shares on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions.
(c) Annualized
FOCUSED VALUE FUND
CLASS B SHARES
CLASS B SHARES
MARCH 30, 2001(A)
THROUGH
PER SHARE OPERATING PERFORMANCE FEBRUARY 28, 2002
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.02)
Net realized and unrealized loss on investments (0.59)
TOTAL FROM INVESTMENT OPERATIONS (0.61)
---------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income --/(c)/
NET ASSET VALUE, END OF PERIOD $9.39
TOTAL INVESTMENT RETURN/(b)/ (6.09)%
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000) $114,443
Average net assets (000) $115,557
RATIOS TO AVERAGE NET ASSETS:/(d)/
Expenses, including distribution and service (12b-1) fees 2.24%
Expenses, excluding distribution and service (12b-1) fees 1.24%
Net investment income (.23)%
---------------------------------------------------------------------------
|
(a) Commencement of investment operations.
(b) Total investment return does not consider the effects of sales loads. Total investment return is calculated assuming a purchase of shares on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions.
(c) Less than $.005 per share.
(d) Annualized
FOCUSED VALUE FUND
CLASS C SHARES
CLASS C SHARES
MARCH 30, 2001(A)
THROUGH
PER SHARE OPERATING PERFORMANCE FEBRUARY 28, 2002
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (0.02)
Net realized and unrealized loss on investments (0.59)
TOTAL FROM INVESTMENT OPERATIONS (0.61)
----------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income --/(c)/
NET ASSET VALUE, END OF PERIOD $9.39
TOTAL INVESTMENT RETURN/(b)/ (6.09)%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000) $82,673
Average net assets (000) $84,579
RATIOS TO AVERAGE NET ASSETS:/(d)/
Expenses, including distribution and service (12b-1) fees 2.24%
Expenses, excluding distribution and service (12b-1) fees 1.24%
Net investment income (.23)%
----------------------------------------------------------------------------
|
(a) Commencement of investment operations.
(b) Total investment return does not consider the effects of sales loads. Total investment return is calculated assuming a purchase of shares on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions.
(c) Less than $0.005 per share.
(d) Annualized.
FOCUSED VALUE FUND
CLASS Z SHARES
CLASS Z SHARES
MARCH 30, 2001(A)
THROUGH
PER SHARE OPERATING PERFORMANCE FEBRUARY 28, 2002
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.07
Net realized and unrealized loss on investments (0.58)
TOTAL FROM INVESTMENT OPERATIONS (0.51)
---------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.08)
NET ASSET VALUE, END OF PERIOD $9.41
TOTAL INVESTMENT RETURN/(b)/ (5.16)%
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000) $17,106
Average net assets (000) $19,590
RATIOS TO AVERAGE NET ASSETS:/(c)/
Expenses, including distribution and service (12b-1) fees 1.24%
Expenses, excluding distribution and service (12b-1) fees 1.24%
Net investment income .76%
---------------------------------------------------------------------------
|
(a) Commencement of investment operations.
(b) Total investment return does not consider the effects of sales loads. Total investment return is calculated assuming a purchase of shares on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions.
(c) Annualized.
[THIS PAGE INTENTIONALLY LEFT BLANK]
The Strategic Partners
Mutual Fund Family
Strategic Partners offers a variety of mutual funds designed to meet your individual needs. For information about these funds, contact your financial adviser or call us at (800) 225-1852. Please read the applicable prospectus carefully before you invest or send money.
STRATEGIC PARTNERS ASSET ALLOCATION FUNDS
Strategic Partners Conservative Growth Fund Strategic Partners Moderate Growth Fund Strategic Partners High Growth Fund
STRATEGIC PARTNERS OPPORTUNITY FUNDS
Strategic Partners Focused Growth Fund Strategic Partners New Era Growth Fund Strategic Partners Focused Value Fund
Strategic Partners Mid-Cap Value Fund (currently in subscription, public offering is expected to begin on June 17, 2002)
STRATEGIC PARTNERS STYLE SPECIFIC FUNDS
Strategic Partners Large Capitalization Growth Fund
Strategic Partners Large Capitalization Value Fund
Strategic Partners Small Capitalization Growth Fund
Strategic Partners Small Capitalization Value Fund
Strategic Partners International Equity Fund
Strategic Partners Total Return Bond Fund
58 STRATEGIC PARTNERS OPPORTUNITY FUNDS [PHONE] (800) 225-1852
Notes
-------------------------------------------------------------------------------
59
|
Notes
Notes
-------------------------------------------------------------------------------
61
|
FOR MORE INFORMATION
|
Please read this prospectus before you invest in the Funds and keep it for future reference. For information or shareholder questions contact:
PRUDENTIAL MUTUAL FUND SERVICES LLC
P.O. BOX 8098
PHILADELPHIA, PA 19101
(800) 225-1852
(732) 482-7555 (Calling from outside the U.S.)
Outside Brokers should contact:
Prudential Investment Management Services LLC
P.O. Box 8310
Philadelphia, PA 19101
(800) 778-8769
Visit our website at:
WWW.STRATEGICPARTNERS.COM
Additional information about the Funds can be obtained without charge and can be found in the following documents:
STATEMENT OF ADDITIONAL
INFORMATION (SAI) (incorporated by reference into this prospectus)
ANNUAL REPORT (contains a discussion of the market conditions and investment strategies that significantly affected the Funds' performance during the last fiscal year)
SEMI-ANNUAL REPORT
MFSP500A
SPFGPRO
3711
FDO2181
PRU-MFS-12SP-04/02
You can also obtain copies of Fund documents from the Securities and Exchange
Commission as follows:
BY MAIL
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
BY ELECTRONIC REQUEST
publicinfo@sec.gov (The SEC charges a fee to copy documents.)
IN PERSON
Public Reference Room in
Washington, DC (For hours of operation, call 1-202-942-8090)
VIA THE INTERNET
on the EDGAR Database at
http://www.sec.gov
Investment Company Act File No. 811-09805
Nasdaq CUSIP
------ -----
Focused Growth Fund
Class A SPFAX 86276R-10-6
Class B SPFBX 86276R-20-5
Class C SPFCX 86276R-30-4
Class Z SPFZX 86276R-40-3
New Era Growth Fund -
Class A SNGAX 86276R-50-2
Class B SNGBX 86276R-60-1
Class C SNGCX 86276R-70-0
Class Z SNGZX 86276R-80-9
Focused Value Fund
Class A SUVAX 86276R-85-8
Class B SUVBX 86276R-86-6
Class C SUVCX 86276R-87-4
Class Z SUVZX 86276R-88-2
|
STRATEGIC PARTNERS OPPORTUNITY FUNDS
Strategic Partners Focused Growth Fund
Strategic Partners New Era Growth Fund
Strategic Partners Focused Value Fund
Statement of Additional Information
dated April 26, 2002
Strategic Partners Opportunity Funds, formerly Strategic Partners Series (the Trust), is an open-end management investment company currently composed of four separate investment portfolios professionally managed by Prudential Investments LLC (PI or the Manager). Each portfolio benefits from discretionary advisory services provided by an investment adviser (each, an Adviser, and collectively, the Advisers) identified, retained and supervised and compensated by the Manager. The Trust currently offers the following four portfolios:
. Strategic Partners Focused Growth Fund (the Focused Growth Fund)
. Strategic Partners New Era Growth Fund (the New Era Growth Fund)
. Strategic Partners Focused Value Fund (the Focused Value Fund)
. Strategic Partners Mid-Cap Value Fund (the Mid-Cap Value Fund)
This statement of additional information (SAI) describes the Focused Growth, New Era Growth and Focused Value Funds (each a Fund and collectively, the Funds). A separate statement of additional information dated April 15, 2002 describes the Mid-Cap Value Fund, which is currently in subscription; a public offering is expected to begin on June 17, 2002.
The Trust's address is Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, and its telephone number is (800) 225-1852.
This SAI is not a prospectus and should be read in conjunction with the prospectus of the Funds dated April 26, 2002, a copy of which may be obtained from the Trust upon request at the address or phone number noted above. The Funds' audited financial statements for the fiscal periods ended February 28, 2002 are incorporated in this SAI by reference to the Trust's 2002 annual reports to shareholders (File No. 811-9805). You may obtain a copy of the Trust's annual report at no charge by request to the Trust at the address or phone number noted above.
TABLE OF CONTENTS
Page
----
History of the Trust................................. B-2
Description of the Funds, Their Investments and Risks B-2
Investment Restrictions.............................. B-15
Management of the Trust.............................. B-17
Control Persons and Principal Holders of Securities.. B-23
Investment Advisory and Other Services............... B-23
Brokerage Allocation and Other Practices............. B-30
Capital Shares, Other Securities and Organization.... B-32
Purchase, Redemption and Pricing of Fund Shares...... B-33
Shareholder Investment Account....................... B-42
Net Asset Value...................................... B-45
Taxes, Dividends and Distributions................... B-46
Performance Information.............................. B-49
Financial Statements................................. B-53
Appendix I--General Investment Information........... I-1
Appendix II--Historical Performance Data............. II-1
|
MFSP500B PRU-MFS-13SP-04/02
FD02192
SPFGSAI
3712
|
HISTORY OF THE TRUST
The Funds are series of the Trust, which was established as a Delaware business trust on January 28, 2000 under the name "Strategic Partners Series." On September 4, 2001, the Trust amended its Certificate of Trust, changing its name to "Strategic Partners Opportunity Funds."
DESCRIPTION OF THE FUNDS, THEIR INVESTMENTS AND RISKS
Classification. The Trust is an open-end, management investment company. Each Fund is a non-diversified series of the Trust.
Investment Strategies, Policies and Risks. The Funds' prospectus sets forth each Fund's investment objectives. This section provides additional information on the principal investment policies and strategies of the Funds, as well as information on certain non-principal investment policies and strategies. A Fund may not be successful in achieving its objective and you could lose money.
Equity-Related Securities
Equity-related securities include common stocks as well as preferred stocks; securities convertible into or exchangeable for common or preferred stocks; equity investments in partnerships, joint ventures and other forms of non-corporate investment; real estate investment trusts (REITs); American Depositary Receipts (ADRs); American Depositary Shares (ADSs); and warrants and rights exercisable for equity securities. Purchased options are not considered equity securities for the Funds' purposes. No Fund will invest more than 5% of its total assets in unattached rights and warrants.
American Depositary Receipts and American Depositary Shares. ADRs and ADSs are U.S. dollar-denominated certificates or shares issued by a United States bank or trust company and represent the right to receive securities of a foreign issuer deposited in a domestic bank or foreign branch of a United States bank and traded on a United States exchange or in the over-the-counter market. Generally, ADRs and ADSs are in registered form. There are no fees imposed on the purchase or sale of ADRs and ADSs when purchased from the issuing bank or trust company in the initial underwriting, although the issuing bank or trust company may impose charges for the collection of dividends and the conversion of ADRs and ADSs into the underlying securities. Investment in ADRs and ADSs has certain advantages over direct investment in the underlying foreign securities since: (1) ADRs and ADSs are denominated in U.S. dollars, registered domestically, easily transferable, and market quotations are readily available for them; and (2) issuers whose securities are represented by ADRs and ADSs are usually subject to auditing, accounting, and financial reporting standards comparable to those of domestic issuers.
Warrants and Rights. A warrant gives the holder thereof the right to subscribe by a specified date to a stated number of shares of stock of the issuer at a fixed price. Warrants tend to be more volatile than the underlying stock, and if, at a warrant's expiration date the stock is trading at a price below the price set in the warrant, the warrant will expire worthless. Conversely, if at the expiration date, the underlying stock is trading at a price higher than the price set in the warrant, a Fund can acquire the stock at a price below its market value. Rights are similar to warrants but normally have a shorter duration and are distributed directly by the issuer to shareholders. Rights and warrants have no voting rights, receive no dividends and have no rights with respect to the corporation issuing them.
Real Estate Investment Trusts. Each Fund may invest in securities of real estate investment trusts or REITs. Unlike corporations, REITs do not have to pay income taxes if they meet certain requirements of the Internal Revenue Code of 1986, as amended (the Code). To qualify, a REIT must distribute at least 95% of its taxable income to its shareholders and receive at least 75% of that income from rents, mortgages and sales of property. REITs offer investors greater liquidity and diversification than direct ownership of a handful of properties, as well as greater income potential than an investment in common stock. Like any investment in real estate, though, a REIT's performance depends on several factors, such as its ability to find tenants for its properties, to renew leases and to finance property purchases and renovations.
U.S. Government Securities
U.S. Treasury Securities. Each Fund is permitted to invest in U.S. Treasury securities, including bills, notes, bonds and other debt securities issued by the U.S. Treasury. These instruments are direct obligations of the U.S. government and, as such, are backed by the "full faith and credit" of the United States. They differ primarily in their interest rates, the lengths of their maturities and the dates of their issuances.
Securities Issued or Guaranteed by U.S. Government Agencies and Instrumentalities. Each Fund may invest in securities issued by agencies of the U.S. government or instrumentalities of the U.S. government. These obligations, including those that are guaranteed by federal agencies or instrumentalities, may or may not be backed by the full faith and credit of the United States. Obligations of the Government National Mortgage Association (GNMA), the Farmers Home Administration and the Small Business Administration are backed by the full faith and credit of the United States. In the case of securities not backed by the full faith and credit of the United States, each Fund must look principally to the agency issuing or guaranteeing the obligation for ultimate repayment and may not be able to assert a claim against the United States if the agency or instrumentality does not meet its commitments. Securities in which a Fund may invest that are not backed by the full faith and credit of the United States include obligations such as those issued by the Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation (FHLMC), the Federal National Mortgage Association, the Student Loan Marketing Association, Resolution Funding Corporation and the Tennessee Valley Authority, each of which has the right to borrow from the U.S. Treasury to meet its obligations, and obligations of the Farm Credit System, the obligations of which may be satisfied only by the individual credit of the issuing agency. FHLMC investments may include collateralized mortgage obligations.
Obligations issued or guaranteed as to principal and interest by the U.S. government may be acquired by a Fund in the form of custodial receipts that evidence ownership of future interest payments, principal payments or both on certain U.S. Treasury notes or bonds. Such notes and bonds are held in custody by a bank on behalf of the owners. These custodial receipts are commonly referred to as Treasury strips.
Special Considerations. U.S. government securities are considered among the most creditworthy of fixed-income investments. The yields available from U.S. government securities generally are lower than the yields available from corporate debt securities. The values of U.S. government securities (like those of other fixed-income securities generally) will change as interest rates fluctuate. During periods of falling U.S. interest rates, the values of U.S. government securities generally rise and, conversely, during periods of rising interest rates, the values of such securities generally decline. The magnitude of these fluctuations will generally be greater for securities with longer-term maturities. Although changes in the value of U.S. government securities will not affect investment income from those securities, they will affect the net asset value of a Fund.
Foreign Investments
Each of the Focused Growth and Focused Value Funds may invest up to 20% of its total assets in securities of foreign issuers, and the New Era Growth Fund may invest up to 35% of its total assets in these securities. Foreign securities include money market instruments and debt and equity securities. ADRs and ADSs and similar receipts or shares traded in U.S. markets are not considered foreign securities within this limitation.
Investing in securities of foreign issuers and countries involves certain considerations and risks that are not typically associated with investing in securities of domestic companies. Foreign issuers are not generally subject to uniform accounting, auditing and financial standards or other requirements comparable to those applicable to U.S. companies. There may also be less government supervision and regulation of foreign securities exchanges, brokers and public companies than exist in the United States. Dividends and interest paid by foreign issuers may be subject to withholding and other foreign taxes that may decrease the net return on such investments as compared to dividends and interest paid to a Fund by domestic companies. There may be the possibility of expropriations, confiscatory taxation, political, economic or social instability or diplomatic developments that could affect assets of a Fund held in foreign countries.
There may be less publicly available information about foreign issuers and governments compared to reports and ratings published about U.S. companies. Foreign securities markets have substantially less volume than, for example, the New York Stock Exchange and securities of some foreign issuers are less liquid and more volatile than securities of comparable U.S. companies. Brokerage commissions and other transaction costs of foreign securities exchanges are generally higher than in the United States.
In addition, if the security is denominated in a foreign currency, it will be affected by changes in currency exchange rates and in exchange control regulations, and costs will be incurred in connection with conversions between currencies. A change in the value of any such currency against the U.S. dollar will result in a corresponding change in the U.S. dollar value of a Fund's securities denominated in that currency. Such changes also will affect a Fund's income and distributions to shareholders. In addition, although a Fund will receive income in such currencies, the Fund will be required to compute and distribute its income in U.S. dollars. Therefore, if the exchange rate for any such currency declines after the Fund's income has been accrued and translated into U.S. dollars, the Fund could be required to liquidate portfolio securities to make such distributions, particularly in instances in which the amount of income the Fund is required to distribute is not immediately reduced by the decline in such currency. Similarly, if an
exchange rate declines between the time a Fund incurs expenses in U.S. dollars
and the time such expenses are paid, the amount of such currency required to be
converted into U.S. dollars in order to pay such expenses in U.S. dollars will
be greater than the equivalent amount in any such currency of such expenses at
the time they were incurred. Each Fund may, but need not, enter into foreign
currency forward contracts, options on foreign currencies and futures contracts
on foreign currencies and related options, for hedging purposes, including:
locking-in the U.S. dollar price of the purchase or sale of securities
denominated in a foreign currency; locking-in the U.S. dollar equivalent of
dividends to be paid on such securities that are held by the Fund; and
protecting the U.S. dollar value of such securities that are held by the Fund.
Under the Internal Revenue Code, changes in an exchange rate that occur between the time a Fund accrues interest or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities will result in foreign currency gains or losses that increase or decrease an investment company's taxable income. The exchange rates between the U.S. dollar and other currencies can be volatile and are determined by such factors as supply and demand in the currency exchange markets, international balances of payments, government intervention, speculation and other economic and political conditions.
Foreign securities include securities of any foreign country an Adviser considers appropriate for investment by a Fund. Foreign securities may also include securities of foreign issuers that are traded in U.S. dollars in the United States although the underlying security is usually denominated in a foreign currency.
The costs attributable to foreign investing are higher than the costs of domestic investing. For example, the cost of maintaining custody of foreign securities generally exceeds custodian costs for domestic securities, and transaction and settlement costs of foreign investing are frequently higher than those attributable to domestic investing. Foreign investment income may be subject to foreign withholding or other government taxes that could reduce the return to a Fund on those securities. Tax treaties between the United States and certain foreign countries may, however, reduce or eliminate the amount of foreign tax to which a Fund would be subject.
Risk Factors and Special Considerations of Investing in Euro-denominated Securities. On January 1, 1999, 11 of the 15 member states of the European Monetary Union introduced the "euro" as a common currency. During a three-year transitional period, the euro will coexist with each member state's national currency. By July 1, 2002, the euro is expected to become the sole legal tender of the member states. During the transition period, each Fund will treat the euro as a separate currency from the national currency of any member state.
The adoption by the member states of the euro will eliminate the substantial currency risk among member states and will likely affect the investment process and considerations of each Fund's Advisers. To the extent that a Fund holds non-U.S. dollar-denominated securities, including those denominated in the euro, the Fund will still be subject to currency risk due to fluctuations in those currencies as compared to the U.S. dollar.
The medium- to long-term impact of the introduction of the euro in member states cannot be determined with certainty at this time. In addition to the effects described above, it is likely that more general long-term ramifications can be expected, such as changes in economic environment and changes in behavior of investors, all of which will impact a Fund's investments.
Risk Management and Return Enhancement Strategies
Each Fund also may engage in various portfolio strategies, including using derivatives, to seek to reduce certain risks of its investments and to attempt to enhance return. These strategies currently include the use of options on stock indexes and futures contracts and options on futures. Each Fund also may purchase futures contracts on foreign currencies and on debt securities and aggregates of debt securities. A Fund's ability to use these strategies may be limited by various factors, such as market conditions, regulatory limits and tax considerations and there can be no assurance that any of these strategies will succeed. A Fund, and thus its investors, may lose money through any unsuccessful use of these strategies. If new financial products and risk management techniques are developed, a Fund may use them to the extent consistent with its investment objective and policies.
Options on Securities Indexes. Each Fund may purchase and write (that is, sell) put and call options on securities indexes that are traded on U.S. or foreign securities exchanges or in the over-the-counter market to try to enhance return or to hedge the Fund's portfolio. Each Fund may write covered put and call options to generate additional income through the receipt of premiums, purchase put options in an effort to protect the value of a security that it owns against a decline in market value and purchase call options in an effort to protect against an increase in the price of securities it intends to purchase. Each Fund also may purchase put and call options to offset previously written put and call options of the same series.
A call option gives the purchaser, in exchange for a premium paid, the right, for a specified period of time, to purchase the position subject to the option at a specified price (the exercise price or strike price). The writer of a call option, in return for the premium, has the obligation, upon exercise of the option, to deliver a specified amount of cash to the purchaser upon receipt of the exercise price. When a Fund writes a call option, the Fund gives up the potential for gain on the underlying position in excess of the exercise price of the option during the period that the option is open. A put option gives the purchaser, in return for a premium, the right, for a specified period of time, to sell the position subject to the option to the writer of the put at the specified exercise price. The writer of the put option, in return for the premium, has the obligation, upon exercise of the option, to acquire the position at the exercise price. The Fund might, therefore, be obligated to purchase the underlying position for more than its current market price.
Each Fund will write only "covered" options. A written option is covered if, as long as the Fund is obligated under the option, it (1) owns an offsetting position in the underlying securities that comprise the index or (2) segregates cash or other liquid assets in an amount equal to or greater than its obligation under the option. Under the first circumstance, the Fund's losses are limited because it owns the underlying position; under the second circumstance, in the case of a written call option, the Fund's losses are potentially unlimited. There is no limitation on the amount of call options each Fund may write.
The multiplier for an index option performs a function similar to the unit of trading for a stock option. It determines the total dollar value per contract of each point in the difference between the exercise price of an option and the current level of the underlying index. A multiplier of 100 means that a one-point difference will yield $100. Options on different indexes may have different multipliers. Because exercises of index options are settled in cash, a call writer cannot determine the amount of its settlement obligations in advance and, unlike call writing on specific stocks, cannot provide in advance for, or cover, its potential settlement obligations by acquiring and holding the underlying securities. In addition, unless a Fund has other liquid assets that are sufficient to satisfy the exercise of a call, the Fund would be required to liquidate portfolio securities or borrow in order to satisfy the exercise.
Because the value of an index option depends upon movements in the level of the index rather than the price of a particular security, whether a Fund will realize a gain or loss on the purchase or sale of an option on an index depends upon movements in the level of securities prices in the market generally or in an industry or market segment rather than movements in the price of a particular security. Accordingly, successful use by a Fund of options on indexes would be subject to an Adviser's ability to predict correctly movements in the direction of the securities market generally or of a particular industry. This requires different skills and techniques than predicting changes in the price of individual stocks. The Advisers currently use such techniques in conjunction with the management of other mutual funds.
Risks of Transactions in Options. An option position may be closed out only on an exchange, board of trade or other trading facility that provides a secondary market for an option of the same series. Although a Fund generally will purchase or write only those options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange will exist for any particular option, or at any particular time, and for some options no secondary market on an exchange or otherwise may exist. In such event it might not be possible to effect closing transactions in particular options, with the result that the Fund would have to exercise its options in order to realize any profit and would incur brokerage commissions upon the exercise of call options and upon the subsequent disposition of underlying securities acquired through the exercise of call options or upon the purchase of underlying securities for the exercise of put options. If a Fund as a covered call option writer is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying security until the option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include the following: (1) there may be insufficient trading interest in certain options; (2) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (3) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options or underlying securities; (4) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (5) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current trading volume; or (6) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in the class or series of options) would cease to exist, although outstanding options on that exchange that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms. There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain of the facilities of any of the clearing corporations inadequate, and thereby result in the institution by an exchange of special procedures that may interfere with the timely execution of customers' orders. Each Fund intends to purchase and sell only those options that are cleared by clearinghouses whose facilities are considered to be adequate to handle the volume of options transactions.
Risks of Options on Indexes. Each Fund's purchase and sale of options on indexes will be subject to risks described above under "Risks of Transactions in Options." In addition, the distinctive characteristics of options on indexes create certain risks that are not present with stock options.
Index prices may be distorted if trading of certain stocks included in the index is interrupted. Trading in the index options also may be interrupted in certain circumstances, such as if trading were halted in a substantial number of stocks included in the index. If this occurred, a Fund would not be able to close out options that it had purchased or written and, if restrictions on exercise were imposed, may be unable to exercise an option it holds, which could result in substantial losses to the Fund. It is each Fund's policy to purchase or write options only on indexes that include a number of stocks sufficient to minimize the likelihood of a trading halt in the index.
The ability to establish and close out positions on such options will be subject to the development and maintenance of a liquid secondary market. It is not certain that this market will develop in all index option contracts. Neither Fund will purchase or sell any index option contract unless and until, in an Adviser's opinion, the market for such options has developed sufficiently that the risk in connection with such transactions is not substantially greater than the risk in connection with options on securities in the index.
Special Risks of Writing Calls on Indexes. Because exercises of index options are settled in cash, a call writer such as a Fund cannot determine the amount of its settlement obligations in advance and, unlike call writing on specific stocks, cannot provide in advance for, or cover, its potential settlement obligations by acquiring and holding the underlying securities. However, each Fund will write call options on indexes only under the circumstances described below under "Limitations on the Purchase and Sale of Options on Stock Indexes and Futures Contracts and Options on Futures Contracts."
Price movements in a Fund's portfolio probably will not correlate precisely with movements in the level of the index and, therefore, the Fund bears the risk that the price of the securities held by the Fund may not increase as much as the index. In such event, the Fund would bear a loss on the call that is not completely offset by movements in the price of the Fund's portfolio. It is also possible that the index may rise when the Fund's portfolio of stocks does not rise. If this occurred, the Fund would experience a loss on the call that is not offset by an increase in the value of its portfolio and might also experience a loss in its portfolio.
Unless a Fund has other liquid assets that are sufficient to satisfy the exercise of a call, the Fund would be required to liquidate portfolio securities in order to satisfy the exercise. Because an exercise must be settled within hours after receiving the notice of exercise, if the Fund fails to anticipate an exercise, it may have to borrow from a bank (in amounts not exceeding 20% of the Fund's total assets) pending settlement of the sale of securities in its portfolio and would incur interest charges thereon.
When a Fund has written a call, there is also a risk that the market may decline between the time the Fund has a call exercised against it, at a price that is fixed as of the closing level of the index on the date of exercise, and the time the Fund is able to sell stocks in its portfolio. As with stock options, the Fund will not learn that an index option has been exercised until the day following the exercise date but, unlike a call on stock where the Fund would be able to deliver the underlying securities in settlement, the Fund may have to sell part of its investment portfolio in order to make settlement in cash, and the price of such investments might decline before they can be sold. This timing risk makes certain strategies involving more than one option substantially more risky with index options than with stock options. For example, even if an index call that the Fund has written is "covered" by an index call held by the Fund with the same strike price, the Fund will bear the risk that the level of the index may decline between the close of trading on the date the exercise notice is filed with the clearing corporation and the close of trading on the date the Fund exercises the call it holds or the time the Fund sells the call that, in either case, would occur no earlier than the day following the day the exercise notice was filed.
If a Fund holds an index option and exercises it before final determination of the closing index value for that day, it runs the risk that the level of the underlying index may change before closing. If such a change causes the exercised option to fall out-of-the-money, the Fund will be required to pay the difference between the closing index value and the exercise price of the option (times the applicable multiplier) to the assigned writer. Although the Fund may be able to minimize this risk by withholding exercise instructions until just before the daily cutoff time or by selling rather than exercising an option when the index level is close to the exercise price, it may not be possible to eliminate this risk entirely because the cutoff times for index options may be earlier than those fixed for other types of options and may occur before definitive closing index values are announced.
Futures Contracts. As a purchaser of a futures contract, each Fund incurs an obligation to take delivery of a specified amount of the obligation underlying the futures contract at a specified time in the future for a specified price. As a seller of a futures contract, each Fund incurs an obligation to deliver the specified amount of the underlying obligation at a specified time in return for
an agreed upon price. Each Fund may purchase futures contracts on stock indexes and foreign currencies. Each Fund may purchase futures contracts on debt securities, including U.S. government securities, aggregates of debt securities, stock indexes and foreign currencies.
A "sale" of a futures contract (or a "short" futures position) means the assumption of a contractual obligation to deliver the securities or currency underlying the contract at a specified price at a specified future time. A "purchase" of a futures contract (or a "long" futures position) means the assumption of a contractual obligation to acquire the securities or currency underlying the contract at a specified price at a specified future time. Certain futures contracts are settled on a net cash payment basis rather than by the sale and delivery of the securities or currency underlying the futures contract. U.S. futures contracts have been designed by exchanges that have been designated as "contract markets" by the Commodity Futures Trading Commission (the CFTC), an agency of the U.S. government, and must be executed through a futures commission merchant (that is, a brokerage firm) that is a member of the relevant contract market. Futures contracts trade on these contract markets and the exchange's affiliated clearing organization guarantees performance of the contracts as between the clearing members of the exchange.
At the time a futures contract is purchased or sold, a Fund must allocate cash or securities as a deposit payment (initial margin). It is expected that the initial margin on U.S. exchanges will vary from one-half of 1% to 4% of the face value of the contract. Under certain circumstances, however, such as during periods of high volatility, the Fund may be required by an exchange to increase the level of its initial margin payment. Thereafter, the futures contract is valued daily and the payment in cash of "variation margin" may be required, a process known as "mark-to-the-market." Each day, the Fund is required to provide or is entitled to receive variation margin in an amount equal to any change in the value of the contract since the preceding day.
Although most futures contracts call for actual delivery or acceptance of securities or cash, the contracts usually are closed out before the settlement date without the making or taking of delivery. A futures contract sale is closed out by effecting a futures contract purchase for the same aggregate amount of the specific type of security and the same delivery date. If the sale price exceeds the offsetting purchase price, the seller would be paid the difference and would realize a gain. If the offsetting purchase price exceeds the sale price, the seller would pay the difference and would realize a loss. Similarly, a futures contract purchase is closed out by effecting a futures contract sale for the same aggregate amount of the specific type of security (or currency) and the same delivery date. If the offsetting sale price exceeds the purchase price, the purchaser would realize a gain, whereas if the purchase price exceeds the offsetting sale price, the purchaser would realize a loss. There is no assurance that a Fund will be able to enter into a closing transaction.
When a Fund enters into a futures contract it is initially required to segregate with its custodian, in the name of the broker performing the transaction, an "initial margin" of cash or other liquid assets equal to approximately 2% to 3% of the contract amount. Initial margin requirements are established by the exchanges on which futures contracts trade and may, from time to time, change. In addition, brokers may establish margin deposit requirements in excess of those required by the exchanges.
Initial margin in futures transactions is different from margin in securities transactions in that initial margin does not involve the borrowing of funds by a broker's client but is, rather, a good faith deposit on a futures contract that will be returned to a Fund upon the proper termination of the futures contract. The margin deposits made are marked-to-market daily and a Fund may be required to segregate subsequent deposits at its custodian for that purpose, of cash or other liquid assets, called "variation margin," in the name of the broker, which are reflective of price fluctuations in the futures contract.
A stock index futures contract is an agreement in which the writer (or seller) of the contract agrees to deliver to the buyer an amount of cash equal to a specific dollar amount times the difference between the value of a specific stock index at the close of the last trading day of the contract and the price at which the agreement is made. No physical delivery of the underlying stocks in the index is made. When the futures contract is entered into, each party deposits an initial margin with a broker or in a segregated custodial account of approximately 5% of the contract amount. Subsequent variation market payments will be made on a daily basis as the price of the underlying stock index fluctuates, making the long and short positions in the futures contracts more or less valuable.
The ordinary spreads between values in the cash and futures markets, due to differences in the character of those markets, are subject to distortions. In addition, futures contracts entail risks. First, all participants in the futures market are subject to initial and variation margin requirements. Rather than meeting additional variation margin requirements, investors may close futures contracts through offsetting transactions that could distort the normal relationship between the cash and futures markets. Second, the liquidity of the futures market depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, thus producing price distortions. Third, from the point of view of speculators, the margin deposit requirements in the futures market are less onerous
than margin requirements in the securities market. Increased participation by speculators in the futures market may cause temporary price distortions. Due to the possibility of distortion, a correct forecast of general interest rate trends by an Adviser may still not result in a successful transaction.
Options on Futures Contracts. Each Fund also will enter into options on futures contracts for certain bona fide hedging, return enhancement and risk management purposes. Each Fund may purchase put and call options and write (that is, sell) "covered" put and call options on futures contracts that are traded on U.S. and foreign exchanges. An option on a futures contract gives the purchaser the right, but not the obligation, to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the option exercise period. The writer of the option is required upon exercise to assume an offsetting futures position (a short position if the option is a call and a long position if the option is a put). If the option is exercised by the holder before the last trading day during the option period, the option writer delivers the futures position, as well as any balance in the writer's futures margin account, which represents the amount by which the market price of the stock index futures contract at exercise exceeds, in the case of a call, or is less than, in the case of a put, the exercise price of the option on the stock index future. If it is exercised on the last trading day, the option writer delivers to the option holder cash in an amount equal to the difference between the option exercise price and the closing level of the relevant index on the date the option expires.
The holder or writer of an option may terminate its position by selling or purchasing an option of the same series. There is no guarantee that such closing transactions can be effected.
Each Fund may only write (that is, sell) covered put and call options on futures contracts. A Fund will be considered "covered" with respect to a call option it writes on a futures contract if the Fund owns the securities or currency that is deliverable under the futures contract or an option to purchase that futures contract having a strike price equal to or less than the strike price of the "covered" option and having an expiration date not earlier than the expiration date of the "covered" option, or if it segregates and maintains with its custodian for the term of the option cash or other liquid assets, equal to the fluctuating value of the optioned futures. A Fund will be considered "covered" with respect to a put option it writes on a futures contract if it owns an option to sell that futures contract having a strike price equal to or greater than the strike price of the "covered" option and having an expiration date not earlier than the expiration date of the "covered" option, or if it segregates with its custodian for the term of the option cash or other liquid assets at all times equal in value to the exercise price of the put (less any initial margin deposited by the Fund with its custodian with respect to such put option). There is no limitation on the amount of a Fund's assets that can be segregated.
Writing a put option on a futures contract serves as a partial hedge against an increase in the value of securities a Fund intends to acquire. If the futures price at expiration of the option is above the exercise price, the Fund will retain the full amount of the option premium that provides a partial hedge against any increase that may have occurred in the price of the securities the Fund intends to acquire. If the market price of the underlying futures contract is below the exercise price when the option is exercised, the Fund will incur a loss, which may be wholly or partially offset by the decrease in the value of the securities the Fund intends to acquire.
Writing a call option on a futures contract serves as a partial hedge against a decrease in the value of a Fund's portfolio securities. If the market price of the underlying futures contract at expiration of a written call option is below the exercise price, the Fund will retain the full amount of the option premium, thereby partially hedging against any decline that may have occurred in the Fund's holdings of securities. If the futures price when the option is exercised is above the exercise price, however, the Fund will incur a loss, which may be wholly or partially offset by the increase in the value of the securities in the Fund's portfolio that were being hedged.
Each Fund will purchase put options on futures contracts to hedge its portfolio against the risk of a decline in the value of the securities it owns as a result of market activity or fluctuating currency exchange rates. Each Fund will also purchase call options on futures contracts as a hedge against an increase in the value of securities the Fund intends to acquire as a result of market activity or fluctuating currency exchange rates.
Futures Contracts on Foreign Currencies and Options Thereon. Each Fund may buy and sell futures contracts on foreign currencies and purchase and write options thereon. Generally, foreign currency futures contracts and options thereon are similar to the futures contracts and options thereon discussed previously. By entering into currency futures and options thereon on U.S. and foreign exchanges, a Fund will seek to establish the rate at which it will be entitled to exchange U.S. dollars for another currency at a future time. By selling currency futures, the Fund will seek to establish the number of dollars it will receive at delivery for a certain amount of a foreign currency. In this way, whenever the Fund anticipates a decline in the value of a foreign currency against the U.S.
dollar, the Fund can attempt to "lock in" the U.S. dollar value of some or all of the securities held in its portfolio that are denominated in that currency. By purchasing currency futures, each Fund can establish the number of dollars it will be required to pay for a specified amount of a foreign currency in a future month. Thus if a Fund intends to buy securities in the future and expects the U.S. dollar to decline against the relevant foreign currency during the period before the purchase is effected, the Fund can attempt to "lock in" the price in U.S. dollars of the securities it intends to acquire. At the time a futures contract is purchased or sold, the Fund must allocate cash or securities as initial margin. Thereafter, the futures contract is valued daily and the payment of "variation margin" may be required, resulting in the Fund's paying or receiving cash that reflects any decline or increase, respectively, in the contract's value, that is, "marked-to-market."
The purchase of options on currency futures will allow each Fund, for the price of the premium and related transaction costs it must pay for the option, to decide whether or not to buy (in the case of a call option) or to sell (in the case of a put option) a futures contract at a specified price at any time during the period before the option expires. If an Adviser, in purchasing an option, has been correct in its judgment concerning the direction in which the market or the price of a foreign currency would move as against the U.S. dollar, the Fund may exercise the option and thereby take a futures position to hedge against the risk it had correctly anticipated or close out the option position at a gain that will offset, to some extent, market or currency exchange losses otherwise suffered by the Fund. If exchange rates move in a way a Fund did not anticipate, however, the Fund will have incurred the expense of the option without obtaining the expected benefit; any such movement in exchange rates may also thereby reduce rather than enhance the Fund's profits on its underlying securities transactions.
Each Fund may also use European-style options. This means that the option is only exercisable immediately prior to its expiration. This is in contrast to American-style options, which are exercisable at any time prior to the expiration date of the option.
Additional Risks of Options, Futures Contracts and Options on Futures Contracts. Futures contracts and options thereon on securities and currencies may be traded on foreign exchanges. Such transactions may not be regulated as effectively as similar transactions in the U.S., may not involve a clearing mechanism and related guarantees, and are subject to the risk of governmental actions affecting trading in, or the prices of, foreign securities. The value of such positions also could be adversely affected by (1) other complex foreign political, legal and economic factors, (2) lesser availability than in the U.S. of data on which to make trading decisions, (3) delays in the Fund's ability to act upon economic events occurring in the foreign markets during non-business hours in the U.S., (4) the imposition of different exercise and settlement terms and procedures and margin requirements than in the U.S. and (5) lesser trading volume.
Exchanges on which options, futures contracts and options on futures contracts are traded may impose limits on the positions that a Fund may take in certain circumstances.
Special Risk Considerations Relating to Futures Contracts and Options Thereon. There are several risks in connection with the use of futures contracts as a hedging device. Due to the imperfect correlation between the price of futures contracts and movements in the currency or group of currencies, the price of a futures contract may move more or less than the price of the currencies being hedged. The use of these instruments will hedge only the currency risks associated with investments in foreign securities, not market risks. In the case of futures contracts on securities indexes, the correlation between the price of the futures contract and the movements in the index may not be perfect. Therefore, a correct forecast of currency rates, market trends or international political trends by an Adviser may still not result in a successful hedging transaction.
A Fund's ability to establish and close out positions in futures contracts and options on futures contracts will be subject to the development and maintenance of liquid markets. Although each Fund generally will purchase or sell only those futures contracts and options thereon for which there appears to be a liquid market, there is no assurance that a liquid market on an exchange will exist for any particular futures contract or option thereon at any particular time. In the event no liquid market exists for a particular futures contract or option thereon in which the Fund maintains a position, it will not be possible to effect a closing transaction in that contract or to do so at a satisfactory price and the Fund would have to either make or take delivery under the futures contract or, in the case of a written option, wait to sell the underlying securities until the option expires or is exercised or, in the case of a purchased option, exercise the option. In the case of a futures contract or an option on a futures contract that the Fund has written and that the Fund is unable to close, the Fund would be required to maintain margin deposits on the futures contract or option and to make variation margin payments until the contract is closed.
Successful use of futures contracts and options thereon by a Fund is subject to the ability of an Adviser to predict correctly movements in the direction of interest and foreign currency rates and the market generally. If the applicable Adviser's expectations are not met, the Fund would be in a worse position than if a hedging strategy had not been pursued. For example, if a Fund has hedged against the possibility of an increase in interest rates that would adversely affect the price of securities in its portfolio and
the price of such securities increases instead, the Fund will lose part or all of the benefit of the increased value of its securities because it will have offsetting losses in its futures positions. In addition, in such situations, if the Fund has insufficient cash to meet daily variation margin requirements, it may have to sell securities to meet the requirements. These sales may, but will not necessarily, be at increased prices that reflect the rising market. A Fund may have to sell securities at a time when it is disadvantageous to do so.
The hours of trading of futures contracts may not conform to the hours during which a Fund may trade the underlying securities. To the extent that the futures markets close before the securities markets, significant price and rate movements can take place in the securities markets that cannot be reflected in the futures markets.
Limitations on the Purchase and Sale of Options on Stock Indexes and Futures Contracts and Options on Futures Contracts. Each Fund will engage in transactions in futures contracts and options thereon only for bona fide hedging, return enhancement and risk management purposes, in each case in accordance with the rules and regulations of the CFTC, and not for speculation.
Each Fund will write put options on stock indexes and futures contracts on foreign currencies only if they are covered by segregating with its custodian an amount of cash or other liquid assets equal to the aggregate exercise price of the puts. In accordance with CFTC regulations, a Fund may not purchase or sell futures contracts or options thereon if the initial margin and premiums for options on futures would exceed 5% of the liquidation value of the Fund's total assets after taking into account unrealized profits and unrealized losses on such contracts; provided, however, that in the case of an option that is in-the-money at the time of the purchase, the in-the-money amount may be excluded in calculating the 5% limitation. The above restriction does not apply to the purchase and sale of futures contracts and options thereon for bona fide hedging purposes within the meaning of the CFTC regulations. In instances involving the purchase of futures contracts or call options thereon or the writing of put options thereon by a Fund, an amount of cash and other liquid assets equal to the market value of the futures contracts and options thereon (less any related margin deposits), will be segregated with the Fund's custodian to cover the position, or alternative cover will be employed, thereby insuring that the use of such instruments is unleveraged. None of the Funds intends to purchase options on securities indexes if the aggregate premiums paid for such outstanding options would exceed 10% of the Fund's total assets.
Except as described below, a Fund will write call options on indexes only if on such date it holds a portfolio of stocks at least equal to the value of the index times the multiplier times the number of contracts. When a Fund writes a call option on a broadly-based stock market index, the Fund will segregate or put into escrow with its custodian, or pledge to a broker as collateral for the option, cash or other liquid assets substantially replicating the movement of the index, in the judgment of the Adviser, with a market value at the time the option is written of not less than 100% of the current index value times the multiplier times the number of contracts.
If a Fund has written an option on an industry or market segment index, it will segregate with its custodian, or pledge to a broker as collateral for the option, at least ten "qualified securities," all of which are stocks of issuers in such industry or market segment, with a market value at the time the option is written of not less than 100% of the current index value times the multiplier times the number of contracts. Such stocks will include stocks that represent at least 50% of the weighting of the industry or market segment index and will represent at least 50% of the Fund's holdings in that industry or market segment. No individual security will represent more than 15% of the amount so segregated or pledged in the case of broadly-based stock market index options or 25% of such amount in the case of industry or market segment index options. If at the close of business on any day the market value of such qualified securities so segregated or pledged falls below 100% of the current index value times the multiplier times the number of contracts, the Fund will so segregate or pledge an amount in cash or other liquid assets equal in value to the difference. In addition, when a Fund writes a call on an index that is in-the-money at the time the call is written, the Fund will segregate with its custodian or pledge to the broker as collateral cash or other liquid assets equal in value to the amount by which the call is in-the-money times the multiplier times the number of contracts. Any amount segregated pursuant to the foregoing sentence may be applied to the Fund's obligation to segregate additional amounts in the event that the market value of the qualified securities falls below 100% of the current index value times the multiplier times the number of contracts. A "qualified security" is an equity security that is listed on a national securities exchange or listed on Nasdaq against which a Fund has not written a stock call option and that has not been hedged by the Fund by the sale of stock index futures. However, if a Fund holds a call on the same index as the call written where the exercise price of the call held is equal to or less than the exercise price of the call written or greater than the exercise price of the call written if the difference is segregated by the Fund in cash or other liquid assets with its custodian, it will not be subject to the requirements described in this paragraph.
Each Fund may engage in futures contracts and options on futures transactions as a hedge against changes, resulting from market or political conditions, in the value of the currencies to which the Fund is subject or to which the Fund expects to be subject in connection with future purchases. Each Fund may engage in such transactions when they are economically appropriate for the
reduction of risks inherent in the ongoing management of the Fund. Each Fund may write options on futures contracts to realize through the receipt of premium income a greater return than would be realized in the Fund's portfolio securities alone.
Each Fund's purchase and sale of futures contracts and purchase and writing of options on futures contracts will be for the purpose of protecting its portfolio against anticipated future changes in foreign currency exchange rates that might otherwise either adversely affect the value of the Fund's portfolio securities or adversely affect the prices of securities that the Fund intends to purchase at a later date, and to enhance the Fund's return. As an alternative to bona fide hedging as defined by the CFTC, a Fund may comply with a different standard established by CFTC rules with respect to futures contracts and options thereon purchased by the Fund incidental to the Fund's activities in the securities markets, under which the value of the assets underlying such positions will not exceed the sum of (1) cash or other liquid assets segregated for this purpose, (2) cash proceeds on existing investments due within thirty days and (3) accrued profits on the particular futures contract or option thereon.
In addition, CFTC regulations may impose limitations on a Fund's ability to engage in certain return enhancement and risk management strategies. There are no limitations on a Fund's use of futures contracts and options on futures contracts beyond the restrictions set forth above.
Although each Fund intends to purchase or sell futures and options on futures only on exchanges where there appears to be an active market, there is no guarantee that an active market will exist for any particular contract or at any particular time. If there is not a liquid market at a particular time, it may not be possible to close a futures position at such time, and, in the event of adverse price movements, the Fund would continue to be required to make daily cash payments of variation margin. However, when futures positions are used to hedge portfolio securities, such securities will not be sold until the futures positions can be liquidated. In such circumstances, an increase in the price of securities, if any, may partially or completely offset losses on the futures contracts.
Risks of Risk Management and Return Enhancement Strategies
Participation in the options or futures market and in currency exchange transactions involves investment risks and transaction costs to which a Fund would not be subject absent the use of these strategies. A Fund, and thus its investors, may lose money through any unsuccessful use of these strategies. If an Adviser's predictions of movements in the direction of the securities or foreign currency markets are inaccurate, the adverse consequences to the Fund may leave the Fund in a worse position than if such strategies were not used. Risks inherent in the use of these strategies include: (1) dependence on an Adviser's ability to predict correctly movements in the direction of securities prices and currency markets; (2) imperfect correlation between the price of options and futures contracts and options thereon and movements in the prices of the securities or currencies being hedged; (3) the fact that skills needed to use these strategies are different from those needed to select portfolio securities; (4) the possible absence of a liquid secondary market for any particular instrument at any time; (5) the risk that the counterparty may be unable to complete the transaction; and (6) the possible inability of the Fund to purchase or sell a portfolio security at a time that otherwise would be favorable for it to do so, or the possible need for the Fund to sell a portfolio security at a disadvantageous time, due to the need for the Fund to maintain "cover" or to segregate assets in connection with hedging transactions.
Position Limits. Transactions by a Fund in futures contracts and options will be subject to limitations, if any, established by each of the exchanges, boards of trade or other trading facilities (including Nasdaq) governing the maximum number of options in each class that may be written or purchased by a single investor or group of investors acting in concert, regardless of whether the options are written on the same or different exchanges, boards of trade or other trading facilities or are held or written in one or more accounts or through one or more brokers. Thus, the number of futures contracts and options that a Fund may write or purchase may be affected by the futures contracts and options written or purchased by other investment advisory clients of an Adviser. An exchange, board of trade or other trading facility may order the liquidations of positions found to be in excess of these limits, and it may impose certain other sanctions.
Loan Participation and Assignments
The Focused Value Fund may invest in loan participations and assignments. The Fund considers these investments to be investments in debt securities for purposes of this SAI. Loan participations typically will result in the Fund having a contractual relationship only with the lender, not with the borrower. The Fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing loan participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation. As a result, the Fund will
assume the credit risk of both the borrower and the lender that is selling the participation. In the event of the insolvency of the lender selling a participation, the Fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower. The Fund will acquire loan participations only if the lender inter-positioned between the Fund and the borrower is determined by an Adviser to be creditworthy. When the Fund purchases assignments from lenders, the Fund will acquire direct rights against the borrower on the loan, except that under certain circumstances such right may be more limited than those held by the assigning lender.
The Focused Value Fund may have difficulty disposing of assignments and loan participations. In certain cases, the market for such instruments is not highly liquid, and therefore the Fund anticipates that in such cases such instruments could be sold only to a limited number of institutional investors. The lack of a highly liquid secondary market may have an adverse impact on the value of such instruments and will have an adverse impact on the Fund's ability to dispose of particular assignments or loan participations in response to a specific economic event, such as deterioration in the creditworthiness of the borrower.
Repurchase Agreements
Each Fund may enter into repurchase agreements, whereby the seller of the security agrees to repurchase that security from the Fund at a mutually agreed-upon time and at a price in excess of the purchase price, reflecting an agreed-upon rate of return effective for the period of time the Fund's money is invested in the repurchase agreement. The period of maturity is usually quite short, possibly overnight or a few days, although it may extend over a number of months. The resale price is in excess of the purchase price, reflecting an agreed-upon rate of return effective for the period of time the Fund's money is invested in the repurchase agreement. A Fund's repurchase agreements will at all times be fully collateralized in an amount at least equal to the resale price. The instruments held as collateral are valued daily, and if the value of the instruments declines, the Fund will require additional collateral. If the seller defaults and the value of the collateral securing the repurchase agreement declines, the Fund may incur a loss.
A Fund will enter into repurchase transactions only with parties meeting creditworthiness standards approved by the applicable Adviser. In the event of a default or bankruptcy by a seller, each Fund will promptly seek to liquidate the collateral.
Each Fund participates in a joint repurchase account with other investment companies managed by PI pursuant to an order of the Securities and Exchange Commission (SEC or the Commission). On a daily basis, any uninvested cash balances of a Fund may be aggregated with those of such investment companies and invested in one or more repurchase agreements. Each Fund participates in the income earned or accrued in the joint account based on the percentage of its investment.
Lending of Securities
Consistent with applicable regulatory requirements, each Fund may lend its portfolio securities to brokers, dealers and financial institutions, provided that outstanding loans do not exceed in the aggregate 33 1/3% of the value of the Fund's total assets and provided that such loans are callable at any time by the Fund and are at all times secured by cash or equivalent collateral (including a line of credit) that is equal to at least 100% of the market value, determined daily, of the loaned securities. During the time portfolio securities are on loan, the borrower will pay the Fund an amount equivalent to any dividend or interest paid on such securities and the Fund may invest the cash collateral and earn additional income, or it may receive an agreed-upon amount of interest income from the borrower. The advantage of such loans is that the Fund continues to receive payments in lieu of the interest and dividends of the loaned securities, while at the same time earning interest either directly from the borrower or on the collateral that will be invested in short-term obligations.
A loan may be terminated by the borrower or by a Fund at any time. If the borrower fails to maintain the requisite amount of collateral, the loan automatically terminates and the Fund could use the collateral to replace the securities while holding the borrower liable for any excess of replacement cost over collateral. As with any extensions of credit, there are risks of delay in recovery and in some cases loss of rights in the collateral should the borrower of the securities fail financially. However, these loans of portfolio securities will only be made to firms determined to be creditworthy pursuant to procedures approved by the Board of Trustees of the Trust (the Board). On termination of the loan, the borrower is required to return the securities to the Fund, and any gain or loss in the market price during the loan would inure to the Fund.
Since voting or consent rights that accompany loaned securities pass to the borrower, each Fund will follow the policy of calling the loan, in whole or in part as may be appropriate, to permit the exercise of such rights if the matters involved would have a material effect on the Fund's investment in the securities that are the subject of the loan. A Fund will pay reasonable finders', administrative and custodial fees in connection with a loan of its securities or may share the interest earned on collateral with the borrower.
Short Sales. Each Fund may sell a security it does not own in anticipation of a decline in the market value of that security (i.e., make short sales). Generally, to complete the transaction, a Fund will borrow the security to make delivery to the buyer. The Fund is then obligated to replace the security borrowed by purchasing it at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay to the tender any interest that accrues during the period of the loan. To borrow the security, the Fund may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker to the extent necessary to meet margin requirements until the short position is closed out. Until the Fund replaces the borrowed security, it will (1) segregate with its custodian cash or other liquid assets at such a level that the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current market value of the security sold short and will not be less than the market value of the security at the time it was sold short or (2) otherwise cover its short position.
A Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will realize a gain if the security declines in price between those dates. This result is the opposite of what one would expect from a cash purchase of a long position in a security. The amount of any gain will be decreased, and the amount of any loss will be increased, by the amount of any premium or interest paid in connection with the short sale. No more than 5% of a Fund's net assets will be, when added together: (1) deposited as collateral for the obligation to replace securities borrowed to effect short sales and (2) segregated in connection with short sales.
Each of the New Era Growth and Focused Value Funds also may make short sales against-the-box. A short sale against-the-box is a short sale in which a Fund owns an equal amount of the securities sold short or securities convertible into or exchangeable for, with or without payment of any further consideration, such securities; provided that if further consideration is required in connection the conversion or exchange, cash or other liquid assets, in an amount equal to such consideration must be segregated for an equal amount of the securities of the same issuer as the securities sold short.
Borrowing
Each Fund may borrow up to 33 1/3% of the value of its total assets (calculated when the loan is made) for temporary, extraordinary or emergency purposes or for the clearance of transactions. Each Fund may pledge up to 20% of its total assets to secure these borrowings. If a Fund's asset coverage for borrowings falls below 300%, the Fund will take prompt action (within 3 days) to reduce its borrowings. If the 300% asset coverage should decline as a result of market fluctuations or other reasons, the Fund may be required to sell portfolio securities to reduce the debt and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell securities at that time. No Fund will purchase portfolio securities when borrowings exceed 5% of the value of its total assets.
Illiquid Securities
Each Fund may hold up to 15% of its net assets in illiquid securities. If a Fund were to exceed this limit, the Advisers would take prompt action to reduce the Fund's holdings in illiquid securities to no more than 15% of its net assets as required by applicable law. Illiquid securities include repurchase agreements that have a maturity of longer than seven days, certain securities with legal or contractual restrictions on resale (restricted securities) and securities that are not readily marketable in markets within or outside of the United States. Repurchase agreements subject to demand are deemed to have a maturity equal to the applicable notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the Securities Act), securities that are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities that have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain securities that are not registered under the Securities Act including repurchase agreements, commercial paper, foreign securities, municipal securities, convertible securities
and corporate bonds and notes. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuer's ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of such investments.
Rule 144A under the Securities Act allows for a broader institutional trading market for securities otherwise subject to restriction on resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the Securities Act for resales of certain securities to qualified institutional buyers. Restricted securities eligible for resale pursuant to Rule 144A under the Securities Act and privately placed commercial paper for which there is a readily available market are treated as liquid only when deemed liquid under procedures established by the Trustees. A Fund's investment in Rule 144A securities could have the effect of increasing illiquidity to the extent that qualified institutional buyers become, for a limited time, uninterested in purchasing Rule 144A securities. The Advisers will monitor the liquidity of such restricted securities subject to the supervision of the Board. In reaching liquidity decisions, an Adviser will consider, among others, the following factors: (1) the frequency of trades and quotes for the security; (2) the number of dealers wishing to purchase or sell the security and the number of other potential purchasers; (3) dealer undertakings to make a market in the security and (4) the nature of the security and the nature of the marketplace trades (for example, the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer). In addition, in order for commercial paper that is issued in reliance on Section 4(2) of the Securities Act to be considered liquid, (a) it must be rated in one of the two highest rating categories by at least two nationally recognized statistical rating organizations (NRSROs), or if only one NRSRO rates the securities, by that NRSRO, or, if unrated, be of comparable quality in the view of an Adviser; and (b) it must not be "traded flat" (that is, without accrued interest) or in default as to principal or interest.
Securities of Other Investment Companies
Each Fund is permitted to invest up to 10% of its total assets in securities of other non-affiliated investment companies. Neither Fund intends to invest in such securities during the coming year. If a Fund does invest in securities of other investment companies, shareholders of the Fund may be subject to duplicate management and advisory fees. See "Investment Restrictions."
Segregated Assets
Each Fund segregates with its custodian, State Street Bank and Trust Company (State Street), cash, U.S. government securities, equity securities (including foreign securities), debt securities or other liquid, unencumbered assets equal in value to its obligations in respect of potentially leveraged transactions. These include forward contracts, when-issued and delayed delivery securities, futures contracts, written options and options on futures contracts (unless otherwise covered). If collateralized or otherwise covered, in accordance with Commission guidelines, these will not be deemed to be senior securities. The assets segregated will be marked-to-market daily.
When-Issued and Delayed Delivery Securities
Each Fund may purchase or sell securities on a when-issued or delayed delivery basis. When-issued or delayed delivery transactions arise when securities are purchased or sold by a Fund with payment and delivery taking place as much as a month or more in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction. Each Fund's custodian will segregate cash or other liquid assets having a value equal to or greater than the Fund's purchase commitments. The securities so purchased are subject to market fluctuation and no interest accrues to the purchaser during the period between purchase and settlement. At the time of delivery of the securities the value may be more or less than the purchase price and an increase in the percentage of a Fund's assets committed to the purchase of securities on a when-issued or delayed delivery basis may increase the volatility of the Fund's net asset value.
Temporary Defensive Strategy and Short-Term Investments
When adverse market or economic conditions dictate a defensive strategy, a Fund may temporarily invest without limit in high quality money market instruments, including commercial paper of corporations, foreign government securities, certificates of deposit, bankers' acceptances and other obligations of domestic and foreign banks, non-convertible debt securities (corporate and government), obligations issued or guaranteed by the U.S. government, its agencies or its instrumentalities, repurchase agreements and cash (foreign currencies or U.S. dollars). Money market instruments typically have a maturity of one year or less as measured from the date of purchase.
These instruments will be U.S. dollar denominated or denominated in a foreign currency. Such investments may be subject to certain risks, including future political and economic developments, the possible imposition of withholding taxes on interest income, the seizure or nationalization of foreign deposits and foreign exchange controls or other restrictions.
A Fund may also temporarily hold cash or invest in high quality foreign or domestic money market instruments pending investment of proceeds from new sales of Fund shares or to meet ordinary daily cash needs subject to the 65% policy.
Portfolio Turnover
As a result of the investment policies described above, a Fund may engage in a substantial number of portfolio transactions. The portfolio turnover rate is generally the percentage computed by dividing the lesser of portfolio purchases or sales (excluding all securities, including options, whose maturities or expiration date at acquisition were one year or less) by the monthly average value of the portfolio. High portfolio turnover (100% or more) involves correspondingly greater brokerage commissions and other transaction costs that are borne directly by a Fund. In addition, high portfolio turnover may also mean that a proportionately greater amount of distributions to shareholders will be taxed as ordinary income rather than long-term capital gains compared to investment companies with lower portfolio turnover. For the fiscal year ended February 28, 2002, the New Era Growth Fund had an annual portfolio turnover rate of 196%, primarily due to volatility in the market for technology stocks. See "Brokerage Allocation and Other Practices" and "Taxes, Dividends and Distributions."
INVESTMENT RESTRICTIONS
The Trust has adopted the investment restrictions listed below as fundamental policies. Under the Investment Company Act of 1940, as amended (the 1940 Act), a fundamental policy may not be changed without the approval of the holders of a majority of the Fund's outstanding voting securities. A "majority of a Fund's outstanding voting securities," when used in this SAI, means the lesser of (1) 67% of the shares represented at a meeting at which more than 50% of the outstanding voting shares are present in person or represented by proxy or (2) more than 50% of the outstanding voting shares.
Each Fund may not:
1. Purchase securities on margin (but a Fund may obtain such short-term credits as may be necessary for the clearance of transactions); provided that the deposit or payment by the Fund of initial or maintenance margin in connection with futures or options is not considered the purchase of a security on margin.
2. Make short sales of securities or maintain a short position if, when added together, more than 25% of the value of a Fund's net assets would be (i) deposited as collateral for the obligation to replace securities borrowed to effect short sales and (ii) allocated to segregated accounts in connection with short sales. Short sales "against-the-box" are not subject to this limitation.
3. Issue senior securities, borrow money or pledge its assets, except that each Fund may borrow up to 33 1/3% of the value of its total assets (calculated when the loan is made) for temporary, extraordinary or emergency purposes or for the clearance of transactions. Each Fund may pledge up to 20% of the value of its total assets to secure such borrowings. For purposes of this restriction, the purchase or sale of securities on a when-issued or delayed delivery basis, forward foreign currency exchange contracts and collateral arrangements relating thereto, and collateral arrangements with respect to futures contracts and options thereon and with respect to the writing of options and obligations of a Fund to Trustees pursuant to deferred compensation arrangements are not deemed to be a pledge of assets subject to this restriction.
4. Purchase any security (other than obligations of the U.S. government, its agencies or instrumentalities) if as a result 25% or more of the Fund's total assets (determined at the time of the investment) would be invested in a single industry.
5. Buy or sell real estate or interests in real estate, except that each Fund may purchase and sell securities which are secured by real estate, securities of companies which invest or deal in real estate and publicly traded securities of real estate investment trusts.
6. Buy or sell commodities or commodity contracts, except that each Fund may purchase and sell financial futures contracts and options thereon, and forward foreign currency exchange contracts.
7. Act as underwriter except to the extent that, in connection with the disposition of portfolio securities, it may be deemed to be an underwriter under certain federal securities laws.
8. Make investments for the purpose of exercising control or management.
9. Invest in securities of other non-affiliated investment companies, except by purchases in the open market involving only customary brokerage commissions and as a result of which each Fund will not hold more than 3% of the outstanding voting securities of any one investment company, will not have invested more than 5% of its total assets in any one investment company and will not have invested more than 10% of its total assets (determined at the time of investment) in such securities of one or more investment companies, or except as part of a merger, consolidation or other acquisition.
10. Make loans, except through (a) repurchase agreements and (b) loans of portfolio securities limited to 33 1/3% of the Fund's total assets.
In addition, the Focused Growth and New Era Growth Funds may not:
11. Purchase more than 10% of all outstanding voting securities of any one issuer.
Whenever any fundamental investment policy or investment restriction states a maximum percentage of a Fund's assets, it is intended that if the percentage limitation is met at the time the investment is made, a later change in percentage resulting from changing total or net asset values will not be considered a violation of such policy. However, in the event that a Fund's asset coverage for borrowings falls below 300%, the Fund will take prompt action to reduce its borrowings, as required by applicable law.
MANAGEMENT OF THE TRUST
Information pertaining to the Trustees of the Trust is set forth below. Trustees who are not deemed to be "interested persons" of the Trust, (as defined in the 1940 Act), are referred to as "Independent Trustees." Trustees who are deemed to be "interested persons" of the Trust are referred to as "Interested Trustees." "Fund Complex" consists the Trust and any other investment companies managed by PI.
Independent Trustees
Number of
Term of Portfolios
Office/2/ in Fund
and Length Complex
Position with of Time Principal Occupations Overseen Other Directorships
Name, Address/1/ and Age the Trust Served During Past 5 Years by Trustee held by Trustee/3/
------------------------ ------------- ---------- --------------------- ---------- -------------------
Eugene C. Dorsey (75) Trustee Since Retired President, Chief Executive 78 Director (since
2000 Officer and Trustee of the Gannett 1996) of First
Foundation (now Freedom Forum) since Financial Fund, Inc.
December 1989; formerly Publisher of (First Financial) and
four Gannett newspapers and Vice The High Yield Plus
President of Gannett Co., Inc.; Chairman Fund, Inc. (High
of Independent Sector, Washington, Yield Plus).
D.C. (largest national coalition of
philanthropic organizations); Chairman
of the American Council for the Arts;
Director of the Advisory Board of Chase
Manhattan Bank of Rochester.
Saul K. Fenster, Ph.D. Trustee Since President (since December 1978) of New 79 Director (since
(69) 2000 Jersey Institute of Technology; 2000) of IDT
Commissioner (since 1998) of the Middle Corporation.
States Association Commission on
Higher Education; Commissioner (since
1985) of the New Jersey Commission on
Science and Technology; Director (since
1998) Society of Manufacturing
Engineering Education Foundation,
formerly a director or trustee of Liberty
Science Center, Research and
Development Council of New Jersey, New
Jersey State Chamber of Commerce, and
National Action Council for Minorities in
Engineering.
Robert E. La Blanc (68) Trustee Since President (since 1981) of Robert E. La 74 Director of Storage
2000 Blanc Associates, Inc. Technology
(telecommunications); formerly General Corporation (since
Partner at Salomon Brothers and Vice- 1979), Titan
Chairman of Continental Telecom; Corporation
Trustee of Manhattan College. (electronics, since
1995), Salient 3
Communications,
Inc., since 1995),
Chartered
Semiconductor Ltd.
(Singapore)(since
1998), First Financial
(since 1999) and
High Yield Plus
(since 1999).
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Number of
Term of Portfolios
Office/2/ in Fund
and Length Complex
Position with of Time Principal Occupations Overseen Other Directorships
Name, Address/1/ and Age the Trust Served During Past 5 Years by Trustee held by Trustee/3/
------------------------ ------------- ---------- --------------------- ---------- -------------------
Douglas H. McCorkindale Trustee Since Formerly Vice Chairman (March 1984- 75 Chairman (since
(62) 2000 May 2000) of Gannett Co. Inc. February 2001),
Chief Executive
Officer (since June
2000) and President
(since September
1997) of Gannett
Co. Inc. (publishing
and media);
Continental Airlines,
Inc., Lockheed
Martin Corp.) (since
2001) and High
Yield Plus (since
1996).
W. Scott McDonald, Jr. Trustee Since Vice President (since 1997) of Kaludis 79
(65) 2000 Consulting Group, Inc. (company
serving higher education); formerly
principal (1995-1997), Scott McDonald
& Associates, Chief Operating Officer
(1991-1995), Fairleigh Dickinson
University, Executive Vice President and
Chief Operating Officer (1975-1991),
Drew University, interim President
(1988-1990), Drew University and
founding director of School, College
and University Underwriters Ltd.
Thomas T. Mooney (60) Trustee Since President of the Greater Rochester 95 Director, President
2000 Metro Chamber of Commerce; formerly and Treasurer of
Rochester City Manager; formerly First Financial,
Deputy Monroe County Executive; (since 1986) and
Trustee of Center for Governmental High Yield Plus
Research, Inc.; Director of Blue Cross of (since 1988).
Rochester, Monroe County Water
Authority and Executive Service Corps
of Rochester.
Stephen Stoneburn (58) Trustee Since President and Chief Executive Officer 74
2000 (since June 1996) of Quadrant Media
Corp. (a publishing company); formerly
President (June 1995-June 1996) of
Argus Integrated Media, Inc.; Senior
Vice President and Managing Director
(January 1993-1995) of Cowles
Business Media and Senior Vice
President of Fairchild Publications, Inc
(1975-1989).
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Number of
Term of Portfolios
Office/2/ in Fund
and Length Complex
Position with of Time Principal Occupations Overseen Other Directorships
Name, Address/1/ and Age the Trust Served During Past 5 Years by Trustee held by Trustee/3/
------------------------ ------------- ---------- --------------------- ---------- -------------------
Joseph Weber, Ph.D. (78) Trustee Since Vice President, Finance, Interclass 62
2000 (international corporate learning) since
1991; formerly President, The Alliance
for Learning; retired Vice President,
Member of the Board of Directors and
Member of the Executive and Operating
Committees, Hoffmann-LaRoche Inc;
Member, Board of Overseers, New
Jersey Institute of Technology. Trustee
and Vice Chairman Emeritus, Fairleigh
Dickinson University.
Clay T. Whitehead (63) Trustee Since President (since 1983) of National 91 Director (since
2000 Exchange Inc. (new business 2000)of First
development firm). Financial and High
Yield Plus.
Interested Trustees/4 /
-----------------------
Number of
Term of Portfolios
Office/2/ in Fund
and Length Complex
Positions with the of Time Principal Occupations Overseen Other Directorships
Name, Address/1/ and Age Trust Served During/ /Past 5 Years by Trustee held by Trustee/3/
------------------------ ------------------ ---------- --------------------- ---------- -------------------
Robert F. Gunia (55) Vice President Since Executive Vice President and Chief 112 Vice President and
and Trustee 2000 Administrative Officer (since June Director (since May
1999) of PI; Executive Vice President 1989) of The Asia
and Treasurer (since January 1996) of Pacific Fund, Inc.
PI; President (since April 1999) of and Nicholas-
Prudential Investment Management Applegate Fund, Inc.
Services LLC (PIMS); Corporate Vice
President (since September 1997) of
Prudential Financial, Inc. (Prudential);
formerly Senior Vice President (March
1987-May 1999) of Prudential
Securities Incorporated (Prudential
Securities); formerly Chief
Administrative Officer (July 1989-
September 1996), Director (January
1989-September 1996) and Executive
Vice President, Treasurer and Chief
Financial Officer (June 1987-December
1996) of Prudential Mutual Fund
Management, Inc. (PMF).
David R. Odenath, Jr. President and Since Officer in Charge, President, Chief 115
(45) Trustee 2000 Executive Officer and Chief Operating
Officer (since June 1999) of PI; Senior
Vice President (since June 1999) of
Prudential; formerly Senior Vice
President (August 1993-May 1999) of
PaineWebber Group, Inc.
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Information pertaining to Officers of the Trust who are not also Trustees is set forth below.
Officers
Term of Office/2/
Position(s) with and Length of Principal Occupations During Past 5
Name, Address/1/ and Age the Trust Time Served Years
------------------------ ---------------- ---------------- -----------------------------------
Judy A. Rice (54) Vice President Since 2000 Executive Vice President (since 1999)
of PI; formerly various positions to
Senior Vice President (1992-1999) of
Prudential Securities; and various
positions to Managing Director
(1975-1992) of Salomon Smith Barney,
Governor of the Money Management
Institute; Member of the Prudential
Securities Operating Council and the
National Association for Variable
Annuities.
George P. Attisano (46) Secretary Since 2000 Vice President and Corporate Counsel of
Prudential and Vice President and
Assistant Secretary of PI (since
September 2000); formerly Associate
Attorney of Kramer Levin Naftalis &
Frankel LLP (April 1998-September 2000)
and Associate Attorney of Wilkie Farr &
Gallagher (September 1996-April 1998).
William V. Healey (48) Assistant Since 2000 Vice President and Associate General
Secretary Counsel (since 1998) of Prudential;
Executive Vice President, Secretary and
Chief Legal Officer (since February
1999) of PI; Senior Vice President,
Chief Legal Officer and Secretary
(since December 1998) of PIMS,
Executive Vice President, Chief Legal
Officer and Secretary (since February
1999) of Prudential Mutual Fund
Services LLC; Director (since June
1999) of ICI Mutual Insurance Company;
prior to August 1998, Associate General
Counsel of the Dreyfus Corporation
(Dreyfus), a subsidiary of Mellon Bank,
N.A. (Mellon Bank), and an officer
and/or director of various affiliates
of Mellon Bank and Dreyfus.
Grace C. Torres (42) Treasurer and Since 2000 Senior Vice President (since January
Principal 2000) of PI; formerly First Vice
Financial and President (December 1996-January 2000)
Accounting of PI and First Vice President (March
Officer 1993-1999) of Prudential Securities.
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/1/ Unless otherwise noted, the address of the Trustees and Officers is c/o Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077.
/2/ There is no set term of office for Trustees and Officers. The Independent Trustees have adopted a retirement policy that calls for retirement of Trustees on December 31 of the year in which they reach the age of 75, except that Mr. Weber will retire by December 31, 2002. The table shows the number of years for which they have served as Trustee and/or Officer.
/3/ This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., "public companies") or other investment companies registered under the 1940 Act.
/4 / "Interested" Trustee, as defined in the 1940 Act, by reason of employment with the Manager, an Adviser or the Distributor.
The Trust has Trustees who, in addition to overseeing the actions of the Fund's Manager, Advisers and Distributor, decide upon matters of general policy, in accordance with the laws of the State of Delaware and the 1940 Act. In addition to their functions set forth under "Investment Advisory and Other Services--Manager and Advisers" and "Principle Underwriter, Distributor and Rule 12b-1 Plans," the Trustees also review the actions of the Trust's Officers, who conduct and supervise the daily business operations of the Funds. Pursuant to the Trust's Agreement and Declaration of Trust, the Board may contract for advisory and management services for the Trust or for any of its series (or class thereof). Any such contract may permit the Manager to delegate certain or all of its duties under such contracts to qualified investment advisers and administrators.
Trustees and Officers of the Trust are also trustees, directors and officers of some or all of the other investment companies advised by the Trust's Manager and distributed by PIMS.
Pursuant to the Management Agreement with the Trust, the Manager pays all compensation of Officers and employees of the Trust as well as the fees and expenses of all the Interested Trustees.
Standing Board Committees
The Board has established two standing committees in connection with the governance of the Trust--Audit and Nominating.
The Audit Committee consists of all of the Independent Trustees. The responsibilities of the Audit Committee are to assist the Board in overseeing the Trust's independent accountants, accounting policies and procedures, and other areas relating to the Trust's auditing processes. The scope of the Audit Committee's responsibilities is oversight. It is management's responsibility to maintain appropriate systems for accounting and internal control and the independent accountants' responsibility to plan and carry out a proper audit. The Audit Committee met four times during the fiscal year ended February 28, 2002.
The Nominating Committee consists of all of the Independent Trustees. This Committee interviews and recommends to the Board persons to be nominated for election as Trustees by the Trust's shareholders and selects and proposes nominees for election by the Board between annual meetings. This Committee does not normally consider candidates proposed by shareholders for election as Trustees. The Nominating Committee also reviews the independence of Trustees currently serving on the Board and recommends to the Board Independent Trustees to be selected for membership on Board Committees. The Nominating Committee reviews each Trustee's investment in the Trust, matters relating to Trustee compensation and expenses and compliance with the Trust's retirement policy. The Nominating Committee did not meet during the fiscal year ended February 28, 2002.
In addition to the two standing Committees of the Trust, the Board has also approved Trustee participation in an Executive Committee designed to coordinate the governance of all of the mutual funds in the Prudential mutual fund complex. The role of the Executive Committee is solely advisory and consultative, without derogation of any of the duties or responsibilities of the Board. Messrs. Dorsey and Mooney serve on the Executive Committee. Independent Trustees from other funds in the Prudential mutual fund complex also serve on the Executive Committee. The responsibilities of the Executive Committee include: facilitating communication and coordination between the Independent Trustees and fund management on issues that affect more than one fund; serving as a liaison between the Boards of Directors/Trustees of funds and fund management; developing, in consultation with outside counsel and management, draft agendas for Board meetings; reviewing and recommending changes to Board practices generally and monitoring and supervising the performance of legal counsel to the funds generally and the Independent Trustees.
The Trust pays each of its Independent Trustees annual compensation in addition to certain out-of-pocket expenses. Trustees who serve on the Committees may receive additional compensation. The amount of compensation paid to each Independent Trustee may change as a result of the introduction of additional funds upon whose Boards the Trustees may be asked to serve.
Independent Trustees may defer receipt of their Trustees' fees pursuant to a deferred fee agreement with the Trust. Under the terms of such agreement, the Trust accrues daily deferred Trustees fees which, in turn, accrue interest at a rate equivalent to the prevailing rate of 90-day U.S. Treasury bills at the beginning of each calendar quarter or, at the daily rate of return of any Prudential mutual fund chosen by the Trustee. The Trust's obligation to make payments of deferred Trustees' fees, together with interest thereon, is a general obligation of the Trust.
The Trust has no retirement or pension plan for its Trustees.
The following table sets forth the aggregate compensation paid by the Trust for the fiscal year ended February 28, 2002 to the Independent Trustees. The table also shows aggregate compensation paid to those Trustees for service on the Trust's Board and the Board of any other investment company in the Fund Complex, for the calendar year ended December 31, 2001.
Compensation Table
Total
Aggregate Compensation
Compensation From Fund
from Complex Paid
Name and Position the Trust To Trustees
----------------- ------------ ------------
Eugene C. Dorsey -- Trustee/2/ $7,138 $120,883 (16/78)/1/
Saul K. Fenster -- Trustee $6,010 $110,332 (21/79)/1/
Maurice F. Holmes -- Trustee/3/ $6,085 $ 55,333 (5/58)/1/
Robert E. La Blanc -- Trustee $5,944 $115,333 (18/74)/1/
Douglas H. McCorkindale -- Trustee/2/ $4,825 $110,000 (17/75)/1/
W. Scott McDonald, Jr. -- Trustee/2/ $6,010 $115,000 (21/79)/1/
Thomas T. Mooney -- Trustee/2/ $4,581 $164,000 (28/95)/1/
Stephen Stoneburn -- Trustee $6,010 $110,332 (18/74)/1/
Joseph Weber -- Trustee $6,010 $ 55,000 (9/62)/1/
Clay T. Whitehead -- Trustee $4,825 $173,000 (30/91)/1/
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/1 /Indicates number of funds/portfolios in Fund Complex (including the Trust) to which aggregate compensation relates.
/2 /Although the last column shows the total amount paid to Trustees from the Fund Complex during the calendar year ended December 31, 2001, such compensation was deferred at the election of Trustees, in whole or in part, under the funds' deferred fee agreement. Including accrued interest on amounts deferred through December 31, 2001, total value of deferred compensation for the year amounted to $135,070, $91,273, $115,056 and $148,850 for Messrs. Dorsey, McCorkindale, McDonald and Mooney, respectively.
/3 /Mr. Holmes retired on March 1, 2002.
Interested Trustees and Officers do not receive compensation from the Trust or any fund in the Fund Complex and therefore are not shown in the compensation table.
The following tables set forth the dollar range of equity securities in the Trust beneficially owned by a Trustee, and, on an aggregate basis, in all registered investment companies overseen by a Trustee in the Fund Complex as of December 31, 2001.
Trustee Share Ownership Table
Independent Trustees
Aggregate Dollar Range of Equity
Securities in All Registered Investment
Dollar Range of Equity Companies Overseen By Trustee in
Name of Trustee Securities in the Trust Fund Complex
--------------- ----------------------- ---------------------------------------
Eugene C. Dorsey -- $10,001 -- $50,000
Saul K. Fenster -- $50,001 -- $100,000
Robert E. La Blanc -- Over $100,000
Douglas H. McCorkindale -- Over $100,000
W. Scott McDonald, Jr. $10,001 -- $50,000 Over $100,000
(Focused Value Fund)
Thomas T. Mooney -- Over $100,000
Stephen Stoneburn $10,001 -- $50,000 Over $100,000
(Focused Growth and
New Era Growth Funds)
Joseph Weber -- --
Clay T. Whitehead $10,001 -- $50,000 $50,001 -- $100,000
(Focused Growth Fund)
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Interested Trustees
Aggregate Dollar Range of Equity
Securities in All Registered Investment
Dollar Range of Equity Companies Overseen By Trustee in
Name of Trustee Securities in the Trust Fund Complex
--------------- ----------------------- ---------------------------------------
Robert F. Gunia -- Over $100,000
David R. Odenath, Jr. -- Over $100,000
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CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Trustees of the Trust are eligible to purchase Class Z shares of the Funds, which are sold without either an initial sales charge or contingent deferred sales charge to a limited group of investors.
As of April 5, 2002, the Trustees and officers of the Trust, as a group, owned less than 1% of the outstanding shares of beneficial interest of each Fund.
As of April 5, 2002, the owners, directly or indirectly, of more than 5% of the outstanding shares of beneficial interest of each Fund were as follows:
Number of Shares
Name Address Fund (class) (% of Fund class)
---- -------------------- --------------- -----------------
Salomon Smith Barney 333 West 34th Street Focused Value/A 289,824/7%
3rd Floor
New York, NY 10001
Salomon Smith Barney 333 West 34th Street Focused Value/B 880,953/7.3%
3rd Floor
New York, NY 10001
Salomon Smith Barney 333 West 34th Street Focused Value/C 994,639/10.2%
3rd Floor
New York, NY 10001
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As of April 5, 2002, Prudential Securities was record holder for other beneficial owners of the following shares of beneficial interest outstanding and entitled to vote in each Fund:
Number of Shares
Fund (% of Fund class)
---- -----------------
Focused Growth
Class A.... 3,817,869/84%
Class B.... 13,574,748/83%
Class C.... 9,851,344/90%
Class Z.... 1,640,274/92%
New Era Growth
Class A.... 4,304,238/89%
Class B.... 9,479,986/90%
Class C.... 8,006,584/92%
Class Z.... 1,829,570/92%
Focused Value
Class A.... 3,580,516/87%
Class B.... 10,481,352/86%
Class C.... 7,931,391/85%
Class Z.... 1,683,031/96%
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INVESTMENT ADVISORY AND OTHER SERVICES
Manager and Advisers
The manager of the Funds is Prudential Investments LLC (PI or the Manager), Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. PI serves as manager to all of the other investment companies that comprise the Prudential mutual funds. See "How the Fund is Managed--Manager" in the prospectuses of the Funds. As of December 31, 2001, PI managed and/or administered open-end and closed-end management investment companies with assets of approximately $100.8 billion.
PI is a wholly-owned subsidiary of PIFM Holdco, Inc., which is a wholly-owned subsidiary of Prudential Asset Management Holding Company, which is a wholly-owned subsidiary of Prudential. Prudential Mutual Fund Services LLC (PMFS), an affiliate of PI, serves as the transfer agent for the Funds.
Pursuant to three Management Agreements with the Trust (each, a Management Agreement, and collectively, the Management Agreements), PI, subject to the supervision of the Board and in conformity with the stated policies of each Fund, manages both the investment operations of each Fund and the composition of its portfolio, including the purchase, retention, disposition and loan of securities and other assets. In connection therewith, PI is obligated to keep certain books and records of each Fund. PI is authorized to enter into subadvisory agreements for investment advisory services in connection with the management of the Fund. PI will continue to have responsibility for all investment advisory services performed pursuant to any such subadvisory agreements. PI will review the performance of all Advisers and make recommendations to the Board with respect to the retention of Advisers and the renewal of contracts. PI also administers each Fund's business affairs and, in connection therewith, furnishes the Funds with office facilities, together with those ordinary clerical and bookkeeping services that are not being furnished by State Street, the Funds' custodian, and PMFS, the Funds' transfer and dividend disbursing agent. The management services of PI for the Funds are not exclusive under the terms of the Management Agreements and PI is free to, and does, render management services to others.
For its services, PI receives, pursuant to the Management Agreements, a fee at an annual rate of 0.90% of each Fund's average daily net assets up to and including $1 billion and 0.85% of average daily net assets in excess of $1 billion. The fee is computed daily and payable monthly.
The following table shows the amounts that the Funds paid to PI pursuant to each Management Agreement for the two fiscal years or periods ended February 28, 2002.
Management Fees Paid to PI
Fiscal Period
Fiscal Year or Period Ended
Fund Ended February 28, 2002 February 28, 2001
---- ----------------------- -----------------
Focused Growth $2,205,508 $2,477,661/1/
New Era Growth $2,150,277 $814,947/2/
Focused Value. $2,172,569/3/ N/A
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/1/ The Focused Growth Fund commenced operations on June 2, 2000.
/2/ The New Era Growth Fund commenced operations on November 22, 2000.
/3/ The Focused Value Fund commenced operations on March 30, 2001.
In connection with its management of the business affairs of each Fund, PI bears the following expenses:
(a) the salaries and expenses of all personnel of each Fund and the Manager, except the fees and expenses of the Independent Trustees;
(b) all expenses incurred by PI or by a Fund in connection with managing the ordinary course of the Fund's business, other than those assumed by the Fund as described below; and
(c) the costs and expenses payable to Prudential Investment Management, Inc. (PIM) under a Sub-Management Agreement, and to Massachusetts Financial Services Company (MFS), Jennison Associates LLC (Jennison), Alliance Capital Management, L.P. (Alliance), Davis Selected Advisers LP (Davis) and Salomon Brothers Asset Management Inc. (Salomon Brothers) pursuant to the subadvisory agreements between PIM and Jennison and between PI and MFS, Jennison, Alliance, Davis and Salomon Brothers (the Subadvisory Agreements).
Under the terms of its Management Agreement, each Fund is responsible for the payment of the following expenses: (a) the fees payable to the Manager, (b) the fees and expenses of Trustees who are not affiliated persons of the Manager or the Fund's Advisers, (c) the fees and certain expenses of the custodian and transfer agent, including the cost of providing records to the Manager in connection with its obligation of maintaining required records of the Fund and of pricing the Fund's shares, (d) the charges and expenses of legal counsel and independent accountants for the Fund, (e) brokerage commissions and any issue or transfer taxes chargeable to the Fund in connection with its securities transactions, (f) all taxes and corporate fees payable by the Fund to governmental agencies, (g) the fees of any trade associations of which the Fund may be a member, (h) the cost of share certificates representing shares of the Fund, (i) the cost of fidelity and liability insurance, (j) certain organization expenses of the Fund and the fees and expenses involved in registering and maintaining registration of the Fund and of its shares with the Commission, including the preparation and printing of the Fund's registration statements and prospectuses for such purposes, and paying the fees and expenses of notice filings made in accordance with state securities laws, (k) allocable communications expenses with respect to investor services and all expenses of shareholders' and Trustees' meetings and of preparing, printing and mailing reports, proxy statements and prospectuses to shareholders in the amount necessary for distribution to the shareholders, (l) litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Fund's business and (m) distribution fees.
Each Management Agreement provides that PI will not be liable for any error of judgment or for any loss suffered by the Fund in connection with the matters to which the Agreement relates, except a loss resulting from willful misfeasance, bad faith, gross negligence or reckless disregard of duty. Each Management Agreement provides that it will terminate automatically if assigned, and that it may be terminated without penalty by either party upon not more than 60 days' nor less than 30 days' written notice. Each Management Agreement will continue in effect for a period of more than two years from the date of execution only so long as such continuance is specifically approved at least annually in conformity with the 1940 Act.
Each Subadvisory Agreement provides that the applicable Adviser will furnish investment advisory services to a portion of the applicable Fund's portfolio in connection with the management of the Fund. In connection therewith, MFS, Jennison, Alliance, Davis and Salomon Brothers are obligated to keep certain books and records of their respective Fund. Under the Subadvisory Agreements, each Adviser, subject to the supervision of PI, is responsible for managing the assets of its respective Fund in accordance with the Fund investment objective, investment program and policies. Each Adviser determines what securities and other instruments are purchased and sold for its respective Fund and is responsible for obtaining and evaluating financial data relevant to the Fund. PI continues to have responsibility for all investment advisory services pursuant to the Management Agreement.
With respect to the Focused Growth Fund, PI has entered into a Sub-Management Agreement with PIM and a Subadvisory Agreement with Alliance. PIM has entered into a Subadvisory Agreement with Jennison. The Sub-Management Agreement provides that PIM shall provide Jennison certain research services and will assist with the maintenance of books and records as Jennison may request from time to time. For its services, PIM is compensated by PI at an annual rate of 0.60% of the average daily net assets of the Fund sub-managed by PIM on total Fund assets up to and including $1 billion and 0.55% of such average daily net assets on total Fund assets in excess of $1 billion. Under the Subadvisory Agreements for the Fund, Alliance is compensated by PI for its services at an annual rate of 0.60% of the average daily net assets of the Fund managed by Alliance up to and including $1 billion of total Fund assets and 0.55% of such average daily net assets on total Fund assets in excess of $1 billion, and Jennison is compensated by PIM (as Sub-Manager) for its services at an annual rate of 0.30% of the average daily net assets advised by Jennison on total Fund assets up to $300 million and 0.25% of such average daily net assets on total Fund assets in excess of $300 million.
Under the Subadvisory Agreements for the New Era Growth Fund, MFS is compensated by PI for its services at an annual rate of 0.50% of the average daily net assets for the portion of such assets that MFS manages up to and including $1 billion of total Fund assets and 0.40% of such average daily net assets in excess of $1 billion of total Fund assets, and Jennison is compensated by PI for its services at an annual rate of 0.50% of the average daily net assets advised by Jennison on total Fund assets up to $1 billion and 0.40% of such average daily net assets on total Fund assets in excess of $1 billion.
Under the Subadvisory Agreements for the Focused Value Fund, Davis is compensated by PI for its services at an annual rate of 0.50% of the average daily net assets advised by Davis on Fund assets up to and including $1 billion and 0.40% of such average daily net assets on Fund assets in excess of $1 billion, and Salomon Brothers is compensated by PI for its services at an annual rate of 0.50% of the average daily net assets advised by Salomon Brothers on Fund assets up to and including $1 billion and 0.40% of such average daily net assets on Fund assets in excess of $1 billion.
Each of the Subadvisory Agreements and the Sub-Management Agreement provides that it will terminate in the event of its assignment (as defined in the 1940 Act) or upon the termination of the Management Agreement pursuant to which such Subadvisory or Sub-Management Agreement was entered into. Each Subadvisory Agreement and the Sub-Management Agreement may be terminated by the Trust, PI or the applicable Adviser (or, with respect to the Sub-Management Agreement, PIM) upon not more than 60 days', nor less than 30 days', written notice. Each of the Subadvisory Agreements and the Sub-Management Agreement provides that it will continue in effect for a period of more than two years from its execution only so long as such continuance is specifically approved at least annually in accordance with the requirements of the 1940 Act.
For the fiscal years or periods ended February 28, 2002 and February 28, 2001, PI paid to PIM and the Advisers the fees set forth in the following table.
Fees Paid to PIM and Advisers
Year or Period
Ended Period Ended
Fund Adviser/PIM February 28, 2002 February 28, 2001
---- ---------------- ----------------- -----------------
Focused Growth/1/..................... Alliance $659,457 $816,103
PIM/2/ $810,882 $835,670
New Era Growth/3/..................... Jennison $635,841 $227,426
MFS $558,758 $225,322
Focused Value/4/...................... Davis $593,640 N/A
Salomon Brothers $611,714 N/A
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/1/ The Focused Growth Fund commenced operations on June 2, 2000.
/2/ From these amounts, PIM paid Jennison subadvisory fees of $405,441 and $417,835 for the fiscal year ended February 28, 2002 and the fiscal period ended February 28, 2001, respectively.
/3/ The New Era Growth Fund commenced operations on November 22, 2000.
/4/ The Focused Value Fund commenced operations on March 30, 2001.
Matters Considered by the Board
The Management, Sub-Management and Subadvisory Agreements were last approved by the Board, including all of the Independent Trustees on May 22, 2001 at a meeting called for that purpose. In approving these Agreements, the Board primarily considered, with respect to the Trust, the nature and quality of the services provided under the Agreements and the overall fairness of the Agreements to the Trust. The Board requested and evaluated reports from the Manager, PIM and the Advisers that addressed specific factors designed to inform the Board's consideration of these and other issues.
With respect to the nature and quality of the services provided by the Manager, Sub-Manager and Advisers, the Board considered the performance of each Fund in comparison to relevant market indexes and the performance of a peer group of investment companies pursuing broadly similar strategies, and reviewed reports prepared by an unaffiliated organization applying various statistical and financial measures of fund performance compared to such indices and peer groups of funds, over the past year and since inception. The Board also evaluated the division of responsibilities among the Manager and its affiliates, and the capabilities of the personnel providing services. The Board also considered the quality of brokerage execution provided by the Manager, Sub-Manager and Advisers. The Board reviewed these firms' use of brokers or dealers in fund transactions that provided research and other services to them, and the benefits derived by each Fund from such services. The Board also considered these firms' positive compliance history, as none of these firms has been subject to any significant compliance problems.
With respect to the overall fairness of the Management, Sub-Management and Subadvisory Agreements, the Board primarily considered the fee structure of the Agreements and the profitability of the Manager, Sub-Manager and the Advisers and their affiliates from their association with the Trust. The Board reviewed information from an independent data service about the rates of compensation paid to investment advisers, and overall expense ratios, for funds comparable in size, character and investment strategy to each Fund. The Board noted that the fee rate paid by the Trust to the Manager was comparable to the median compensation paid by comparable funds. The Board also considered that the Trust's fee structure provides for a reduction of payments resulting from economies of scale. The Board also evaluated the aggregate amount and structure of fees paid by the Manager or Sub-Manager to the Advisers. In concluding that the direct and indirect benefits accruing to the Manager, the Sub-Manager, the Advisers and their affiliates by virtue of their relationship to the Trust, were reasonable in comparison with the costs of the provision of investment advisory services and the benefits accruing to each Fund, the Board reviewed specific data as to each firm's profit or loss on each Fund for the recent period and carefully examined their cost allocation methodology. With respect to profitability, these firms discussed with the Board the allocation methodologies for inter-company revenues and expenses (not including the costs of distributing shares or providing shareholder services) in order to approximate their respective profits from their fees. The Board understood that none of these firms uses its profitability analysis in the management of its businesses other than in connection with the approval or continuation of its agreement, at least in part because the analysis excludes significant costs and include certain revenues that judicial interpretations have required in the context of Board approval of mutual fund advisory agreements. These matters were also considered at the meeting of the Independent Trustees.
Principal Underwriter, Distributor and Rule 12b-1 Plans
Prudential Investment Management Services LLC (PIMS or the Distributor), Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, acts as the distributor of the shares of each Fund. See "How the Trust is Managed--Distributor" in the Funds' prospectus. PIMS is a subsidiary of Prudential.
Pursuant to separate Distribution and Service Plans (the Class A Plan, the Class B Plan and the Class C Plan, collectively, the Plans) adopted by the Trust on behalf of each Fund under Rule 12b-1 under the 1940 Act and a distribution agreement (the Distribution Agreement), the Distributor incurs the expenses of distributing each Fund's Class A, Class B and Class C shares, respectively. The Distributor also incurs the expenses of distributing the Class Z shares of each Fund under the Distribution Agreement, none of which are reimbursed by or paid for by the Fund.
The expenses incurred under the Plans include commissions and account servicing fees paid to, or on account of, brokers or financial institutions that have entered into agreements with the Distributor, advertising expenses, the cost of printing and mailing prospectuses to potential investors and indirect and overhead costs of the Distributor associated with the sale of Fund shares, including lease, utility, communications and sales promotion expenses.
Under the Plans, each Fund is obligated to pay distribution and/or service fees to the Distributor as compensation for its distribution and service activities, not as reimbursement for specific expenses incurred. If the Distributor's expenses exceed its distribution and service fees, a Fund will not be obligated to pay any additional expenses. If the Distributor's expenses are less than such distribution and service fees, it will retain its full fees and realize a profit.
The distribution and/or service fees may also be used by the Distributor to compensate on a continuing basis brokers in consideration for the distribution, marketing, administrative and other services and activities provided by brokers with respect to the promotion of the sale of a Fund's shares and the maintenance of related shareholder accounts.
Class A Plan. Under the Class A Plan, each Fund may pay the Distributor for its distribution-related expenses with respect to Class A shares at an annual rate of up to 0.30% of the average daily net assets of the Class A shares. The Class A Plan provides that (1) up to 0.25% of the average daily net assets of the Class A shares may be used to pay for personal service and/or the maintenance of shareholder accounts (service fee) and (2) total distribution fees (including the service fee of 0.25%) may not exceed 0.30% of the average daily net assets of the Class A shares. The Distributor has contractually agreed to limit its distribution-related fees payable under the Class A Plan to 0.25% of the average daily net assets of the Class A shares for the fiscal years ending July 31, 2002 and July 31, 2003 and contractually limited its distribution-related fees for the fiscal year or period ended February 28, 2002 to 0.25% of the average daily net assets of the Class A shares. On February 26, 2002, the Board voted to change the Trust's fiscal year end from February 28 to July 31. The Distributor also receives an initial sales charge from shareholders. The table below sets forth the payments received by the Distributor under the Class A Plan, the amount spent by the Distributor in distributing Class A shares and the amount of initial sales charges received by the Distributor in connection with the sale of Class A shares for the fiscal year or period ended February 28, 2002 and the fiscal periods ended February 28, 2001.
Amounts Received by the Distributor for Class A Shares
Amount Spent
Distributing Class A Approximate
Fund Distribution Fees Shares Initial Sales Charge
---- ----------------- -------------------- ---------------------
2002 2001 2002 2001 2002 2001
-------- -------- -------- ------- ---------- ----------
Focused Growth/1/..................... $ 86,911 $110,806 $ 78,800 $98,100 $ 169,600 $2,885,400
New Era Growth/2/..................... $119,518 $ 46,924 $109,500 $32,100 $ 114,100 $2,476,200
Focused Value/3/...................... $102,337 N/A $ 94,500 N/A $2,078,500 N/A
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/1/ The Focused Growth Fund commenced operations on June 2, 2000.
/2/ The New Era Growth Fund commenced operations on November 22, 2000.
/3/ The Focused Value Fund commenced operations on March 30, 2001.
The amounts spent by the Distributor in distributing Class A shares were primarily for the payment of account servicing fees to financial advisers and other persons who sell Class A shares.
Class B and Class C Plans. Under the Class B and Class C Plans, each Fund pays the Distributor for its distribution-related expenses with respect to these shares at an annual rate of 1% of the average daily net assets of each of the applicable class of shares. The Class B and Class C Plans provide for the payment to the Distributor of (1) an asset-based sales charge of 0.75% of the average daily net assets of each of the Class B and Class C shares, respectively, and (2) a service fee of 0.25% of the average daily net assets of each of the Class B and Class C shares. The service fee is used to pay for personal service and/or the maintenance of shareholder accounts.
Class B Plan. For the fiscal year or period ended February 28, 2002 and the fiscal periods ended February 28, 2001, the Distributor received the distribution fees paid by the Funds and the proceeds of contingent deferred sales charges (CDSCs) paid by investors on the redemption of Class B shares as set forth below:
Amounts Received by the Distributor for Class B Shares
Fund Distribution Fees Approximate CDSCs
---- --------------------- -----------------
2002 2001 2002 2001
---------- ---------- -------- --------
Focused Growth/1/................. $1,173,839 $1,232,457 $687,300 $416,000
New Era Growth/2/................. $ 911,887 $ 321,690 $641,800 $ 88,600
Focused Value/3/.................. $1,054,260 N/A $512,400 N/A
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/1/ The Focused Growth Fund commenced operations on June 2, 2000.
/2/ The New Era Growth Fund commenced operations on November 22, 2000.
/3/ The Focused Value Fund commenced operations on March 30, 2001.
For the fiscal year or period ended February 28, 2002, it is estimated that the Distributor spent approximately the following amounts in connection with the distribution of the Funds' Class B shares:
Amounts Spent by the Distributor in Connection with Class B Shares
Printing and Compensation to Commission
Mailing Broker/Dealers Payments to
Prospectuses for Commissions Financial Total
to Other than to Representatives Advisers of Amount
Current and Other Prudential Overhead Spent by
Fund Shareholders Expenses Securities Costs/1/ Distributor
---- ------------- ------------------ ----------- ---------- -----------
Focused Growth....... $10,900 $ 91,300 $324,600 $ 251,000 $ 677,800
New Era Growth....... $ 7,300 $ 53,400 $270,600 $ 225,500 $ 556,800
Focused Value/2/..... $19,600 $114,100 $385,000 $5,137,800 $5,656,500
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/1/ Includes (a) the expenses of operating the branch offices of Prudential Securities and Pruco Securities Corporation (Prusec) in connection with the sale of Fund shares, including lease costs, the salaries and employee benefits of operations and sales support personnel, utility costs, communication costs and the costs of stationery and supplies, (b) the cost of client sales seminars, (c) expenses of mutual fund sales coordinators to promote the sale of Fund shares and (d) other incidental expenses relating to branch promotion of fund sales.
/2/ The Focused Value Fund commenced operations on March 30, 2001.
Class C Plan. For the fiscal year or period ended February 28, 2002 and the fiscal periods ended February 28, 2001, the Distributor received the distribution fees paid by the Funds under the Class C Plan, initial sales charges and the proceeds of CDSCs paid by investors on the redemption of shares as set forth below:
Amounts Received by the Distributor for Class C Shares
Approximate Initial Sales
Fund Distribution Fees Charges Approximate CDSCs
---- ----------------- ------------------------- ------------------
2002 2001 2002 2001 2002 2001
-------- -------- -------- ---------- --------- --------
Focused Growth/1/............ $800,742 $908,657 $ 80,000 $1,511,200 $ 156,600 $146,400
New Era Growth/2/............ $764,323 $283,678 $ 47,400 $1,090,400 $ 188,300 $ 30,700
Focused Value/3/............. $771,637 N/A $904,900 N/A $94,300// N/A
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/1/ The Focused Growth Fund commenced operations on June 2, 2000.
/2/ The New Era Growth Fund commenced operations on November 22, 2000.
/3/ The Focused Value Fund commenced operations on March 30, 2001.
For the fiscal year or period ended February 28, 2002, it is estimated that the Distributor spent approximately the following amounts in connection with the distribution of the Funds' Class C shares:
Amounts Spent by the Distributor in Connection with Class C Shares
Printing and Compensation to Commission
Mailing Broker/Dealers Payments to
Prospectuses for Commissions Financial Total
to Other than to Representatives Advisers of Amount
Current and Other Prudential Overhead Spent by
Fund Shareholders Expenses Securities Costs/1/ Distributor
---- ------------- ------------------ ----------- -------- -----------
Focused Growth.......... $ 7,600 $ 900 $472,900 $ 47,300 $ 528,700
New Era Growth.......... $ 6,300 $ 100 $175,700 $ 22,400 $ 204,500
Focused Value/2/........ $13,800 $1,200 $187,700 $802,000 $1,004,700
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/1/ Includes (a) the expenses of operating the branch offices of Prudential
Securities and Prusec in connection with the sale of Fund shares,
including lease costs, the salaries and employee benefits of operations
and sales support personnel, utility costs, communication costs and the
costs of stationery and supplies, (b) the cost of client sales seminars,
(c) expenses of mutual fund sales coordinators to promote the sale of Fund
shares and (d) other incidental expense relating to branch promotion of
Fund sales.
/2/ The Focused Value Fund commenced operations on March 30, 2001.
Distribution expenses attributable to the sale of Class A, Class B or Class C shares of each Fund will be allocated to each such class based upon the ratio of sales of each such class to the sales of Class A, Class B and Class C shares of the Fund other than expenses allocable to a particular class. The distribution fee and sales charge of one class will not be used to subsidize the sale of another class.
The Class A, Class B and Class C Plans continue in effect from year to year, provided that each such continuance is approved at least annually by a vote of the Board, including a majority vote of the Independent Trustees who have no direct or indirect financial interest in the Class A, Class B and Class C Plans or in any agreement related to the Plans (the Rule 12b-1 Trustees), cast in person at a meeting called for the purpose of voting on such continuance. A Plan may be terminated at any time, without penalty, by the vote of a majority of the Rule 12b-1 Trustees or by the vote of the holders of a majority of the outstanding shares of the applicable class of a Fund on not more than 60 days', nor less than 30 days', written notice to any other party to the Plan. The Plans may not be amended to increase materially the amounts to be spent for the services described therein without approval by the shareholders of the applicable class, and all material amendments are required to be approved by the Board in the manner described above. Each Plan will automatically terminate in the event of its assignment. A Fund will not be obligated to pay expenses incurred under any Plan if it is terminated or not continued.
Pursuant to each Plan, the Board will review at least quarterly a written report of the distribution expenses incurred on behalf of each class of shares of the Funds by the Distributor. The report will include an itemization of the distribution expenses and the purposes of such expenditures. In addition, as long as the Plans remain in effect, the selection and nomination of Rule 12b-1 Trustees shall be committed to the Rule 12b-1 Trustees.
Pursuant to the Distribution Agreement, each Fund has agreed to indemnify the Distributor to the extent permitted by applicable law against certain liabilities under the federal securities laws.
In addition to distribution and service fees paid by each Fund under the Class A, Class B and Class C Plans, the Manager (or one of its affiliates) may make payments to dealers (including Prudential Securities) and other persons who distribute shares of a Fund (including Class Z shares). Such payments may be calculated by reference to the net asset value of shares sold by such persons or otherwise.
Fee Waivers/Subsidies
PI may from time to time voluntarily waive all or a portion of its management fee and subsidize all or a portion of the operating expenses of a Fund. In addition, the Distributor has contractually agreed to waive a portion of its distribution and service (12b-1) fees for the Class A shares for the fiscal years ending July 31, 2002 and July 31, 2003. Fee waivers and subsidies will increase a Fund's total return.
NASD Maximum Sales Charge Rule
Pursuant to National Association of Securities Dealers (NASD) Conduct Rules, the Distributor is required to limit aggregate initial sales charges, deferred sales charges and asset-based sales charges to 6.25% of total gross sales of each class of shares. Interest charges equal to the prime rate plus one percent per annum may be added to the 6.25% limitation. Sales from the reinvestment of dividends and distributions are not included in the calculation of the 6.25% limitation. The annual asset-based sales charge of a Fund may not exceed 0.75%. The 6.25% limitation applies to each class of a Fund rather than on a per shareholder basis. If aggregate sales charges were to exceed 6.25% of total gross sales of any class, all sales charges on shares of that class would be suspended.
Other Service Providers
State Street Bank and Trust Company, One Heritage Drive, North Quincy, Massachusetts 02171, serves as custodian for the portfolio securities of each Fund and cash and in that capacity maintains certain financial and accounting books and records pursuant to an agreement with the Trust. Subcustodians provide custodial services for each Fund's foreign assets held outside the United States.
Prudential Mutual Fund Services LLC (PMFS), 194 Wood Avenue South, Iselin, New Jersey 08830, serves as the transfer and dividend disbursing agent of each Fund. PMFS is a wholly-owned subsidiary of PI. PMFS provides customary transfer agency services to each Fund, including the handling of shareholder communications, the processing of shareholder transactions, the maintenance of shareholder account records, the payment of dividends and distributions and related functions. For these services, PMFS receives an annual fee per shareholder account of $10.00, a new account set-up fee for each manually established account of $2.00 and a monthly inactive zero balance account fee per shareholder account of $.20. PMFS is also reimbursed for its out-of-pocket expenses, including but not limited to postage, stationery, printing, allocable communication expenses and other costs.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York 10036, serves as the Trust's independent accountants and in that capacity audits the annual financial statements of the Trust.
Codes of Ethics
The Trust has adopted a Code of Ethics. In addition, the Manager, PIM, the Advisers and the Distributor have each adopted a Code of Ethics (the Codes). The Codes permit personnel subject to the Codes to invest in securities, including securities that may be purchased or held by the Funds. However, the protective provisions of the Codes prohibit certain investments and limit such personnel from making investments during periods when a Fund is making such investments. The Codes are on public file with, and are available from, the Commission.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Manager is responsible for decisions to buy and sell securities, futures and options on securities and futures for the Funds, the selection of brokers, dealers and futures commission merchants to effect the transactions and the negotiation of brokerage commissions, if any. The term "Manager" as used in this section includes the Sub-Manager and the Advisers. Broker-dealers may receive brokerage commissions on Fund portfolio transactions, including options and the purchase and sale of underlying securities upon the exercise of options. On foreign securities exchanges, commissions may be fixed. Orders may be directed to any broker, dealer or futures commission merchant including, to the extent and in the manner permitted by applicable law, Prudential Securities, one of the Advisers or an affiliate thereof (an affiliated broker). Brokerage commissions on United States securities options and futures are subject to negotiation between the Manager and the broker or futures commission merchant.
In the over-the-counter markets, securities are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission, although the price of the security usually includes a profit to the dealer. In underwritten offerings, securities are purchased at a fixed price that includes an amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. On occasion, certain money market instruments and U.S. government agency securities may be purchased directly from the issuer, in which case no commissions or discounts are paid. No Fund will deal with an affiliated broker in any transaction in which the affiliated broker acts as principal, except in accordance with rules of the Commission. Thus, it will not deal in the over-the-counter market with an affiliated broker acting as market maker, and it will not execute a negotiated trade with an affiliated broker if execution involves the affiliated broker acting as principal with respect to any part of a Fund's order.
In placing orders for portfolio securities of a Fund, the Manager's overriding objective is to obtain the best possible combination of favorable price and efficient execution. The Manager seeks to effect each transaction at a price and commission that provides the most favorable total cost or proceeds reasonably attainable in the circumstances. The factors that the Manager may consider in selecting a particular broker, dealer or futures commission merchant (firms) are the Manager's knowledge of negotiated commission rates currently available and other current transaction costs; the nature of the portfolio transaction; the size of the transaction; the desired timing of the trade; the activity existing and expected in the market for the particular transaction; confidentiality; the execution, clearance and settlement capabilities of the firms; the availability of research and research related services provided through such firms; the Manager's knowledge of the financial stability of the firms; the Manager's knowledge of actual or apparent operational problems of firms; and the amount of capital, if any, that would be contributed by firms executing the transaction. Given these factors, a Fund may pay transaction costs in excess of that which another firm might have charged for effecting the same transaction.
When the Manager selects a firm that executes orders or is a party to portfolio transactions, relevant factors taken into consideration are whether that firm has furnished research and research products and/or services, such as research reports, research compilations, statistical and economic data, computer data bases, quotation equipment and services, research oriented computer software, hardware and services, reports concerning the performance of accounts, valuations of securities, investment related periodicals, investment seminars and other economic services and consultants. Such services are used in connection with some or all of the Manager's investment activities; some of such services, obtained in connection with the execution of transactions for one investment account, may be used in managing other accounts, and not all of these services may be used in connection with a Fund.
The Manager maintains an internal allocation procedure to identify those firms who have provided it with research and research related products and/or services, and the amount that was provided, and to endeavor to direct sufficient commissions to them to ensure the continued receipt of those services that the Manager believes provide a benefit to a Fund and its other clients. The Manager makes a good faith determination that the research and/or service is reasonable in light of the type of service provided and the price and execution of the related portfolio transactions.
When the Manager deems the purchase or sale of equities to be in the best interests of a Fund or its other clients, including Prudential, the Manager may, but is under no obligation to, aggregate the transactions in order to obtain the most favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the transactions, as well as the expenses incurred in the transaction, will be made by the Manager in the manner it considers to be most equitable and consistent with its fiduciary obligations to its clients.
The allocation or orders among firms and the commission rates paid are reviewed periodically by the Board. Portfolio securities may not be purchased from any underwriting or selling syndicate of which an affiliated broker, during the existence of the syndicate, is a principal underwriter (as defined in the 1940 Act), except in accordance with rules of the Commission. This limitation, in the opinion of each Fund, will not significantly affect the Fund's ability to pursue its present investment objective. However, in the future, in other circumstances, a Fund may be at a disadvantage because of this limitation in comparison to other funds with similar objectives but not subject to such limitations.
Subject to the above considerations, an affiliated broker may act as a securities broker, dealer or futures commission merchant for a Fund. In order for an affiliated broker to effect any portfolio transactions for a Fund, the commissions, fees or other remuneration received by an affiliated broker must be reasonable and fair compared to the commissions, fees or other remuneration paid to other firms in connection with comparable transactions involving similar securities or futures being purchased or sold on an exchange during a comparable period of time. This standard would allow an affiliated broker to receive no more than the remuneration that would be expected to be received by an unaffiliated firm in a commensurate arm's-length transaction. Furthermore, the Board, including a majority of Independent Trustees, has adopted procedures that are reasonably designed to provide that any commissions, fees or other remuneration paid to an affiliated broker are consistent with the foregoing standard. In accordance with Section 11(a) of the Securities Exchange Act of 1934, Prudential Securities may not retain compensation for effecting transactions on a national securities exchange for a Fund unless the Fund has expressly authorized the retention of such compensation. Prudential Securities must furnish to each Fund at least annually a statement setting forth the total amount of all compensation retained by Prudential Securities from transactions effected for the Fund during the applicable period. Brokerage and futures transactions with Prudential Securities (or any affiliate) are also subject to such fiduciary standards as may be imposed upon Prudential Securities (or such affiliate) by applicable law.
The table below sets forth certain information concerning the payment of commissions by the Funds, including the commissions paid to an affiliated broker for the fiscal year or period ended February 28, 2002 and the fiscal periods ended February 28, 2001.
Focused New Era Focused
Growth Fund/1/ Growth Fund/2/ Value Fund/3/
----------------- ------------------ ------------
2002 2001 2002 2001 2002
-------- -------- -------- -------- ------------
Total brokerage commissions................. $603,156 $889,100 $864,347 $403,500 $745,805
Total brokerage commissions paid to
affiliated brokers........................ $ 0 $ 5,800 $ 0 $ 720 $ 14,025
Percentage of total brokerage commissions
paid to affiliated brokers................ -- 0.7% 0.0% 0.2% 1.9%
Percentage of the aggregate dollar amount of
portfolio transactions involving the
payment of commissions to
affiliated brokers........................ -- 0.7% 0.0% 0.2% 1.9%
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/1 /The Focused Growth Fund commenced operations on June 2, 2000.
/2 /The New Era Growth Fund commenced operations on November 22, 2000.
/3 /The Focused Value Fund commenced operations on March 30, 2001.
Of the total brokerage commissions paid during these periods, the following table sets forth the amount and percentage that the Funds paid to firms that provided research, statistical or other services to the Advisers. The Advisers have not separately identified a portion of such brokerage commissions as applicable to the provision of such research, statistical or other services.
2002 2001
------------------ ------------------
Fund $ Amount Percentage $ Amount Percentage
---- -------- ---------- -------- ----------
Focused Growth/1/.. $18,978 3.15% $785,453 88.34%
New Era Growth/2/.. $ 0 0% $283,449 70.25%
Focused Value/3/... $39,887 5.35% N/A N/A
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/1 /The Focused Growth Fund commenced operations on June 2, 2000.
/2 /The New Era Growth Fund commenced operations on November 22, 2000.
/3 /The Focused Value Fund commenced operations on March 30, 2001.
The Trust is required to disclose the Funds' holdings of securities of the Trust's regular brokers and dealers (as defined under Rule 10b-1 of the 1940 Act) and their parents at February 28, 2002. The following table shows such holdings as of that date.
Fund Broker Dealer Amount Debt/Equity
---- ------------------------- ----------- -----------
Focused Growth.......... American Express Co. $ 907,000 Debt
Citigroup, Inc. $11,039,326 Equity
Goldman Sachs Group, Inc. $ 2,242,038 Equity
Merrill Lynch & Co., Inc. $ 5,835,515 Equity
New Era Growth.......... American Express Co. $ 1,774,205 Equity
Goldman Sachs Group Inc. $ 4,538,000 Debt
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CAPITAL SHARES, OTHER SECURITIES AND ORGANIZATION
The Trust is authorized to issue an unlimited number of shares of beneficial interest, $.001 par value per share, currently divided into five series and four classes, designated Class A, Class B, Class C and Class Z shares. In addition to the three Funds described in this SAI and the Mid-Cap Value Fund, the Trust has established a fifth series, the Strategic Partners Market Opportunity Fund, the shares of which have not yet been registered with the SEC. Each class of shares represents an interest in the same assets of a Fund and is identical in all respects except that (1) each class is subject to different sales charges and distribution and/or service fees (except for Class Z shares, which are not subject to any sales charges and distribution and/or service fees), which may affect performance, (2) each class has exclusive voting rights on any matter submitted to shareholders that relates solely to its arrangement and has separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class, (3) each class has a different exchange privilege, (4) only Class B shares have a conversion feature and (5) Class Z shares are offered exclusively for sale to a limited group of investors. In accordance with the Trust's Agreement and Declaration of Trust, the Trustees may authorize the creation of additional series and classes within such series, with such preferences, privileges, limitations and voting and dividend rights as the Trustees may determine. The voting rights of the shareholders of a series or class can be modified only by the vote of shareholders of that series or class.
Shares of each Fund, when issued, are fully paid, nonassessable, fully transferable and redeemable at the option of the holder. Shares are also redeemable at the option of a Fund under certain circumstances. Each share of each class is equal as to earnings, assets and voting privileges, except as noted above, and each class of shares (with the exception of Class Z shares, which are not subject to any distribution or service fees) bears the expenses related to the distribution of its shares. Except for the conversion feature applicable to the Class B shares, there are no conversion, preemptive or other subscription rights. In the event of liquidation, each share of a Fund is entitled to its portion of all of the Fund's assets after all debt and expenses of the Fund have been paid. Since Class B and Class C shares generally bear higher distribution expenses than Class A shares, the liquidation proceeds to shareholders of those classes are likely to be lower than to Class A shareholders and to Class Z shareholders, whose shares are not subject to any distribution and/or service fees.
The Trust does not intend to hold annual meetings of shareholders unless otherwise required by law. The Trust will not be required to hold meetings of shareholders unless, for example, the election of Trustees is required to be acted on by shareholders under the 1940 Act. Shareholders have certain rights, including the right to call a meeting upon the vote of 10% of the Trust's outstanding shares for the purpose of voting on the removal of one or more Trustees or to transact any other business.
Under the Agreement and Declaration of Trust, the Trustees may authorize the creation of additional series of shares (the proceeds of which would be invested in separate, independently managed portfolios with distinct investment objectives and policies and share purchase, redemption and net asset value procedures) with such preferences, privileges, limitations and voting and dividend rights as the Trustees may determine. All consideration received by a Fund for shares of any additional series, and all assets in which such consideration is invested, would belong to that series (subject only to the rights of creditors of that series) and would be subject to the liabilities related thereto. Under the 1940 Act, shareholders of any additional series of shares would normally have to approve the adoption of any advisory contract relating to such series and of any changes in the fundamental investment policies related thereto.
The Trustees have the power to alter the number and the terms of office of the Trustees, provided that always at least a majority of the Trustees have been elected by the shareholders of the Trust. The voting rights of shareholders are not cumulative, so that holders of more than 50 percent of the shares voting can, if they choose, elect all Trustees being selected, while the holders of the remaining shares would be unable to elect any Trustees.
PURCHASE, REDEMPTION AND PRICING OF FUND SHARES
Shares of each Fund may be purchased at a price equal to the next determined net asset value (NAV) per share plus a sales charge that, at the election of the investor, may be imposed either (1) at the time of purchase (Class A or Class C shares) or (2) on a deferred basis (Class B or Class C shares). Class Z shares of the Funds are offered to a limited group of investors at NAV without any sales charges. See "How to Buy, Sell and Exchange Shares of the Funds" in the Funds' prospectus.
Purchase by Wire
For an initial purchase of shares of a Fund by wire, you must complete an application and telephone PMFS at (800) 225-1852 (toll-free) to receive an account number. The following information will be requested: your name, address, tax identification number, class election, dividend distribution election, amount being wired and wiring bank. Instructions should then be given by you to your bank to transfer funds by wire to State Street Bank and Trust Company, Boston, Massachusetts, Custody and Shareholder Services Division, Attention: Strategic Partners [name of Fund], specifying on the wire the account number assigned by PMFS and your name and identifying the class in which you are investing (Class A, Class B, Class C or Class Z shares).
If you arrange for receipt by State Street of Federal Funds prior to the calculation of NAV (once each business day at the close of regular trading on the New York Stock Exchange (NYSE), usually 4:00 p.m. New York time), on a business day, you may purchase shares of a Fund as of that day. In the event that regular trading on the NYSE closes before 4:00 p.m. New York time, you will receive the following day's NAV if your order to purchase is received after the close of regular trading on the NYSE.
In making a subsequent purchase order by wire, you should wire State Street directly and should be sure that the wire specifies Strategic Partners [name of Fund], Class A, Class B, Class C or Class Z shares and your name and individual account number. It is not necessary to call PMFS to make subsequent purchase orders utilizing Federal Funds.
Issuance of Fund Shares for Securities
Transactions involving the issuance of a Fund's shares for securities (rather than cash) will be limited to (1) reorganizations, (2) statutory mergers, or (3) other acquisitions of portfolio securities that (a) meet the investment objective and policies of the Fund, (b) are liquid and not subject to restrictions on resale, (c) have a value that is readily ascertainable via listing on or trading in a recognized United States or international exchange or market, and (d) are approved by an Adviser.
Specimen Price Make-up
Under the current distribution arrangements between the Trust and the Distributor, Class A* shares are sold with a maximum initial sales charge of 5%, Class C* shares are sold with a 1% initial sales charge, and Class B* and Class Z shares are sold at NAV. Using the NAV of each Fund at February 28, 2002, the maximum offering price of the Fund's shares is as follows:
Focused New Era Focused
Growth Fund Growth Fund Value Fund
----------- ----------- ----------
Class A
NAV and redemption price per Class A share....... $5.95 $6.52 $9.40
Maximum sales charge (5% of offering price)...... 0.31 0.34 0.49
----- ----- -----
Maximum offering price to public................. $6.26 $6.86 $9.89
===== ===== =====
Class B
NAV, offering price and redemption price per
Class B share*................................. $5.87 $6.46 $9.39
===== ===== =====
Class C
NAV and redemption price per Class C share*...... $5.87 $6.46 $9.39
Sales charge (1% of offering price).............. 0.06 0.07 0.09
----- ----- -----
Offering price to public......................... $5.93 $6.53 $9.48
===== ===== =====
Class Z
NAV, offering price and redemption price per
Class Z share.................................. $5.97 $6.54 $9.41
===== ===== =====
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* Class A, Class B and Class C shares are subject to a CDSC on certain redemptions.
Selecting a Purchase Alternative
The following is provided to assist you in determining which method of purchase best suits your individual circumstances and is based on current fees and expenses being charged to a Fund:
If you intend to hold your investment in a Fund for less than 4 years and do not qualify for a reduced sales charge on Class A shares, since Class A shares are subject to an initial sales charge of 5% and Class B shares are subject to a CDSC of 5% that declines to zero over a 6 year period, you should consider purchasing Class C shares over either Class A or Class B shares.
If you intend to hold your investment for longer than 4 years, but less than 5 years, and do not qualify for a reduced sales charge on Class A shares, you should consider purchasing Class B or Class C shares over Class A shares. This is because the initial sales charge plus the cumulative annual distribution-related fee on Class A shares would exceed those of the Class B and Class C shares if you redeem your investment during this time period. In addition, more of your money would be invested initially in the case of Class C shares, because of the relatively low initial sales charge, and all of your money would be invested initially in the case of Class B shares, which are sold at NAV.
If you intend to hold your investment for longer than 5 years, you should consider purchasing Class A shares over either Class B or Class C shares. This is because the maximum sales charge plus the cumulative annual distribution-related fee on Class A shares would be less than those of the Class B and Class C shares.
If you qualify for a reduced sales charge on Class A shares, it generally may be more advantageous for you to purchase Class A shares over either Class B or Class C shares regardless of how long you intend to hold your investment. However, unlike Class B shares, you would not have all of your money invested initially because the sales charge on Class A shares is deducted at the time of purchase. In addition, if you purchase $1 million or more of Class A shares, you are subject to a 1% CDSC on shares sold within 12 months. This charge is waived for all such Class A shareholders other than those who purchased their shares through certain broker-dealers that are not affiliated with Prudential.
If you do not qualify for a reduced sales charge on Class A shares and you purchase Class B or Class C shares, you would have to hold your investment for more than 6 years in the case of Class B shares and for more than 5 years in the case of Class C shares for the higher cumulative annual distribution-related fee on those shares plus, in the case of Class C shares, the 1% initial sales charge to exceed the initial sales charge plus the cumulative annual distribution-related fees on Class A shares. This does not
take into account the time value of money, which further reduces the impact of the higher Class B or Class C distribution-related fee on the investment, fluctuations in NAV, the effect of the return on the investment over this period of time or redemptions when the CDSC is applicable.
Reduction and Waiver of Initial Sales Charge--Class A Shares
Benefit Plans. Class A shares may be purchased at NAV, without payment of an initial sales charge, by pension, profit-sharing or other employee benefit plans qualified under Section 401 of the Internal Revenue Code, deferred compensation or annuity plans under Sections 401(a), 403(b) and 457 of the Internal Revenue Code, "rabbi" trusts and non-qualified deferred compensation plans (collectively, Benefit Plans), provided that the Benefit Plan has existing assets of at least $1 million or 250 eligible employees or participants. Class A shares may be purchased at NAV by participants who are repaying loans made from such plans to the participant.
Other Waivers. In addition, Class A shares may be purchased at NAV, without the initial sales charge, through the Distributor or the Transfer Agent, by:
. officers of the Trust
. employees of the Distributor, Prudential Securities, and their subsidiaries and members of the families of such persons who maintain an "employee related" account at Prudential Securities or the transfer agent
. employees of the Advisers, provided that purchases at NAV are permitted by such person's employer
. Prudential, directors, employees and special agents of Prudential and its subsidiaries and all persons who have retired directly from active service with Prudential or one of its subsidiaries
. registered representatives and employees of brokers who have entered into a selected dealer agreement with the Distributor, provided that purchases at NAV are permitted by such person's employer
. real estate brokers, agents and employees of real estate brokerage companies affiliated with the Prudential Real Estate Affiliates who maintain an account at Prudential Securities, Prusec or with the transfer agent
. investors who have a business relationship with a financial adviser who
joined Prudential Securities from another investment firm, provided that
(1) the purchase is made within 180 days of the commencement of the
financial adviser's employment at Prudential Securities, or within one
year in the case of Benefit Plans, (2) the purchase is made with
proceeds of a redemption of shares of any open-end non-money market fund
sponsored by the financial adviser's previous employer (other than a
fund that imposes a distribution or service fee of 0.25% or less) and
(3) the financial adviser served as the client's broker on the previous
purchase
. investors in Individual Retirement Accounts (IRAs), provided the purchase is made in a directed rollover to such Account or with the proceeds of a tax-free rollover of assets from a Benefit Plan for which Prudential provides administrative or recordkeeping services and further provided that such purchase is made within 60 days of receipt of the Benefit Plan distribution
. orders placed by broker-dealers, investment advisers or financial planners who have entered into an agreement with the Distributor, who place trades for their own accounts or the accounts of their clients and who charge a management, consulting or other fee for their services (for example, mutual fund "wrap" or asset allocation programs)
. orders placed by clients of broker-dealers, investment advisers or financial planners who place trades for customer accounts if the accounts are linked to the master account of such broker-dealer, investment adviser or financial planner and the broker-dealer, investment adviser or financial planner charges the clients a separate fee for its services (for example, mutual fund "supermarket" programs).
For an investor to obtain any reduction or waiver of the initial sales charges, at the time of the sale either the transfer agent must be notified directly by the investor or the Distributor must be notified by the broker facilitating the transaction that the sale qualifies for the reduced or waived sales charge. The reduction or waiver will be granted subject to confirmation of your entitlement. No initial sales charges are imposed upon Class A shares acquired upon the reinvestment of dividends and distributions.
Combined Purchase and Cumulative Purchase Privilege. If an investor or eligible group of related investors purchases Class A shares of a Fund concurrently with Class A shares of other Strategic Partners mutual funds, the purchases may be combined to take advantage of the reduced sales charges applicable to larger purchases. See "How to Buy, Sell and Exchange Shares of the Funds--Reducing or Waiving Class A's Initial Sales Charge" in the prospectus of the Funds.
An eligible group of related Fund investors includes any combination of the following:
. an individual
. the individual's spouse, their children and their parents
. the individual's and spouse's IRA
. any company controlled by the individual (a person, entity or group that holds 25% or more of the outstanding voting securities of a company will be deemed to control the company, and a partnership will be deemed to be controlled by each of its general partners)
. a trust created by the individual, the beneficiaries of which are the individual, his or her spouse, parents or children
. a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act account created by the individual or the individual's spouse
. one or more employee benefit plans of a company controlled by an individual.
Also, an eligible group of related Fund investors may include an employer (or group of related employers) and one or more qualified retirement plans of such employer or employers (an employer controlling, controlled by or under common control with another employer is deemed related to that employer).
The transfer agent, the Distributor or your broker must be notified at the time of purchase that the investor is entitled to a reduced sales charge. The reduced sales charge will be granted subject to confirmation of the investor's holdings. The Combined Purchase and Cumulative Purchase Privilege does not apply to individual participants in any retirement or group plans.
Letters of Intent. Reduced sales charges also are available to investors (or an eligible group of related investors) who enter into a written Letter of Intent providing for the purchase, within a thirteen-month period, of shares of a Fund and shares of other Strategic Partners mutual funds. Retirement and group plans do not qualify to purchase Class A shares at NAV by entering into a Letter of Intent.
For purposes of the Letter of Intent, all shares of a Fund and shares of other Strategic Partners mutual funds that were previously purchased and are still owned and money market fund shares received for such shares in an exchange are also included in determining the applicable reduction. However, the values of shares held directly with the Transfer Agent and through your broker will not be aggregated to determine the reduced sales charge.
A Letter of Intent permits a purchaser to establish a total investment goal to be achieved by any number of investments over a thirteen-month period. Each investment made during the period will receive the reduced sales charge applicable to the amount represented by the goal, as if it were a single investment. Escrowed Class A shares totaling 5% of the dollar amount of the Letter of Intent will be held by the transfer agent in the name of the investor. The effective date of a Letter of Intent may be back-dated up to 90 days, in order that any investments made during this 90-day period, valued at the investor's cost, can be applied to the fulfillment of the Letter of Intent goal.
The Letter of Intent does not obligate the investor to purchase, nor a Fund to sell, the indicated amount. In the event the Letter of Intent goal is not satisfied within the thirteen-month period, the investor is required to pay the difference between the sales charge otherwise applicable to the purchases made during this period and sales charge actually paid. Such payment may be made directly to the Distributor or, if not paid, the Distributor will redeem sufficient escrowed shares to obtain such difference. Investors electing to purchase Class A shares of a Fund pursuant to a Letter of Intent should carefully read such Letter of Intent.
The Distributor must be notified at the time of purchase that the investor is entitled to a reduced sales charge. The reduced sales charge will be granted subject to confirmation of the investor's holdings. Letters of Intent are not available to individual participants in any retirement or group plans.
Class B Shares
The offering price of Class B shares for investors choosing one of the deferred sales charge alternatives is the NAV next determined following receipt of an order in proper form by the transfer agent, your broker or the Distributor. Although there is no
sales charge imposed at the time of purchase, redemptions of Class B shares may be subject to a CDSC. See "Sale of Shares--Contingent Deferred Sales Charge" below.
The Distributor will pay, from its own resources, sales commissions of up to 4% of the purchase price of Class B shares to brokers, financial advisers and other persons who sell Class B shares at the time of sale. This facilitates the ability of a Fund to sell the Class B shares without an initial sales charge being deducted at the time of purchase. The Distributor anticipates that it will recoup its advancement of sales commissions from the combination of the CDSC and the distribution fee.
Class C Shares
The offering price of Class C shares is the next determined NAV plus a 1% sales charge. In connection with the sale of Class C shares, the Distributor will pay, from its own resources, brokers, financial advisers and other persons who distribute Class C shares a sales commission of up to 2% of the purchase price at the time of the sale.
Waiver of Initial Sales Charge--Class C Shares
Benefit Plans. Class C shares may be purchased at NAV, without payment of an initial sales charge, by Benefit Plans (as defined above).
Investment of Redemption Proceeds from Other Investment Companies. Investors may purchase Class C shares at NAV, without the initial sales charge, with the proceeds from the redemption of shares of any unaffiliated registered investment company that were not held through an account with any Prudential affiliate. Such purchases must be made within 60 days of the redemption. This waiver is not available to investors who purchase shares directly from the transfer agent. You must notify your broker if you are entitled to this waiver and provide it with such supporting documents as it may deem appropriate.
Class Z Shares
Class Z shares of each Fund currently are available for purchase by the following categories of investors:
. Benefit Plans, provided that such Plans (in combination with other plans sponsored by the same employer or group of related employers) have at least $50 million in defined contribution assets;
. participants in any fee-based program or trust program sponsored by an affiliate of the Distributor that includes mutual funds as investment options and for which a Fund is an available option;
. current and former Trustees of the Trust;
. the Manager or an Adviser or any of their affiliates with an investment of $10 million or more; and
. qualified state tuition programs (529 plans).
After a Benefit Plan qualifies to purchase Class Z shares, all subsequent purchases will be for Class Z shares.
In connection with the sale of Class Z shares, the Manager, the Distributor or one of their affiliates may pay brokers, financial advisers and other persons who distribute shares a finder's fee, from its own resources, based on a percentage of the net asset value of shares sold by such persons.
Rights of Accumulation
Reduced sales charges also are available through rights of accumulation, under which an investor or an eligible group of related investors, as described above under "Combined Purchase and Cumulative Purchase Privilege," may aggregate the value of their existing holdings of shares of a Fund and shares of other Strategic Partners mutual funds (excluding money market fund shares, other than those acquired pursuant to the exchange privilege) to determine the reduced sales charge. Rights of accumulation may be applied across the classes of shares of Strategic Partners mutual funds. The value of shares held directly with the Transfer Agent and through your broker will not be aggregated to determine the reduced sales charge. The value of existing holdings for purposes of determining the reduced sales charge is calculated using the maximum offering price (NAV plus maximum sales charge) as of the previous business day.
The Distributor, your broker or the transfer agent must be notified at the time of purchase that the investor is entitled to a reduced sales charge. The reduced sales charge will be granted subject to confirmation of the investor's holdings. Rights of accumulation are not available to individual participants in any retirement or group plans.
Sale of Shares
You can redeem your shares at any time for cash at the NAV next determined after the redemption request is received in proper form (in accordance with procedures established by the Transfer Agent in connection with investors' accounts) by the Transfer Agent, the Distributor or your broker. In certain cases, however, redemption proceeds will be reduced by the amount of any applicable CDSC, as described below. See "Contingent Deferred Sales Charge" below. If you are redeeming your shares through a broker, your broker must receive your sell order before a Fund computes its NAV for that day (at the close of regular trading on the NYSE, usually 4:00 p.m. New York time) in order to receive that day's NAV. In the event that regular trading on the NYSE closes before 4:00 p.m. New York time, you will receive the following day's NAV if your order to sell is received after the close of regular trading on the NYSE. Your broker will be responsible for furnishing all necessary documentation to the Distributor and may charge you for its services in connection with redeeming shares of a Fund.
If you hold shares in non-certificate form, a written request for redemption signed by you exactly as the account is registered is required. If you hold certificates, the certificates must be received by the transfer agent, the Distributor or your broker in order for the redemption request to be processed. If redemption is requested by a corporation, partnership, trust or fiduciary, written evidence of authority acceptable to the transfer agent must be submitted before such request will be accepted. All correspondence and documents concerning redemptions should be sent to a Fund in care of its transfer agent, Prudential Mutual Fund Services LLC, Attention: Redemption Services, P.O. Box 8149, Philadelphia, Pennsylvania 19101, to the Distributor or to your broker.
Expedited Redemption Privilege. By electing the Expedited Redemption Privilege, you may arrange to have redemption proceeds sent to your bank account. The Expedited Redemption Privilege may be used to redeem shares in an amount of $200 or more, except if an account for which an expedited redemption is requested has a net asset value of less than $200, the entire account will be redeemed. Redemption proceeds in the amount of $1,000 or more will be remitted by wire to your bank account at a domestic commercial bank that is a member of the Federal Reserve system. Redemption proceeds of less than $1,000 will be mailed by check to your designated bank account. Any applicable CDSC will be deducted from the redemption proceeds. Expedited redemption requests may be made by telephone or letter, must be received by the applicable Fund prior to 4:00 p.m. New York time, to receive a redemption amount based on that day's NAV and are subject to the terms and conditions as set forth in the Funds' prospectus regarding redemption of shares. For more information, see "How to Buy, Sell and Exchange Shares of the Funds--Telephone Redemptions or Exchanges" in the Funds' prospectus. The Expedited Redemption Privilege may be modified or terminated at any time without notice. To receive further information, shareholders should contact PMFS at (800) 225-1852.
Signature Guarantee. If the proceeds of the redemption (1) exceed $100,000,
(2) are to be paid to a person other than the record owner, (3) are to be sent
to an address other than the address on the transfer agent's records, or (4)
are to be paid to a corporation, partnership, trust or fiduciary, and your
shares are held directly with the transfer agent, the signature(s) on the
redemption request and on the certificates, if any, or stock power must be
guaranteed by an "eligible guarantor institution." An "eligible guarantor
institution" includes any bank, broker, dealer, savings association or credit
union. PMFS reserves the right to request additional information from, and make
reasonable inquiries of, any eligible guarantor institution.
Payment for shares presented for redemption will be made by check within seven days after receipt by the transfer agent, the Distributor or your broker of the written request and certificates, if issued, except as indicated below. If you hold shares through a broker, payment for shares presented for redemption will be credited to your account at your broker, unless you indicate otherwise. Such payment may be postponed or the right of redemption suspended at times (1) when the NYSE is closed for other than customary weekends and holidays, (2) when trading on the NYSE is restricted, (3) when an emergency exists as a result of which disposal by a Fund of securities owned by it is not reasonably practicable or it is not reasonably practicable for the Fund fairly to determine the value of its net assets, or (4) during any other period when the Commission, by order, so permits; provided that applicable rules and regulations of the Commission shall govern as to whether the conditions prescribed in (2), (3) or (4) exist.
Redemption in Kind. If the Board determines that it would be detrimental to the best interests of the remaining shareholders of a Fund to make payment wholly or partly in cash, the Fund may pay the redemption price in whole or in part by a distribution in kind of securities from the investment portfolio of the Fund, in lieu of cash, in conformity with applicable rules of the Commission. Securities will be readily marketable and will be valued in the same manner as in a regular redemption. If your shares are redeemed
in kind, you would incur transaction costs in converting the assets into cash. The Trust, however, has elected to be governed by Rule 18f-1 under the 1940 Act, under which a Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the NAV of the Fund during any 90-day period for any one shareholder.
Involuntary Redemption. In order to reduce expenses of the Funds, the Board may redeem all of the shares of any shareholder, other than a shareholder that is an IRA or other tax-deferred retirement plan, whose account has an account value of less than $500 due to a redemption. A Fund will give such shareholders 60 days' prior written notice in which to purchase sufficient additional shares to avoid such redemption. No CDSC will be imposed on any such involuntary redemption.
90-day Repurchase Privilege. If you redeem your shares and have not previously exercised the repurchase privilege, you may reinvest any portion or all of the proceeds of such redemption in shares of a Fund at the NAV next determined after the order is received, which must be within 90 days after the date of the redemption. Any CDSC paid in connection with such redemption will be credited (in shares) to your account. (If less than a full repurchase is made, the credit will be on a pro rata basis.) You must notify the transfer agent, either directly or through the Distributor or your broker, at the time the repurchase privilege is exercised to adjust your account for the CDSC you previously paid. Thereafter, any redemptions will be subject to the CDSC applicable at the time of the redemption. See "Contingent Deferred Sales Charge" below. Exercise of the repurchase privilege will generally not affect federal tax treatment of any gain realized upon redemption. However, if the redemption was made within a 30 day period of the repurchase and if the redemption resulted in a loss, some or all of the loss, depending on the amount reinvested, may not be allowed for federal income tax purposes.
Contingent Deferred Sales Charge
Certain redemptions of Class A shares within 12 months of purchase are subject to a 1% CDSC. Redemptions of Class B shares will be subject to a CDSC declining from 5% to zero over a six-year period. Class C shares redeemed within 18 months of purchase will be subject to a 1% CDSC. The CDSC will be deducted from the redemption proceeds and reduce the amount paid to you. The CDSC will be imposed on any redemption by you that reduces the current value of your Class A, Class B or Class C shares to an amount that is lower than the amount of all payments by you for shares during the preceding 12 months, in the case of Class A shares (in certain cases), six years, in the case of Class B shares, and 18 months, in the case of Class C shares. A CDSC will be applied on the lesser of the original purchase price or the current value of the shares being redeemed. Increases in the value of your shares or shares acquired through reinvestment of dividends or distributions are not subject to a CDSC. The amount of any CDSC will be paid to and retained by the Distributor. If you purchased or hold your shares through a broker, third party administrator or other authorized entity that maintains subaccount recordkeeping, any applicable CDSC that you will pay will be calculated and reported to PMFS by such broker, administrator or other authorized entity.
The amount of the CDSC, if any, will vary depending on the number of years from the time of payment for the purchase of shares until the time of redemption of such shares. Solely for purposes of determining the number of years from the time of any payment for the purchase of shares, all payments during a month will be aggregated and deemed to have been made on the last day of the month. The CDSC will be calculated from the first day of the month after the initial purchase, excluding the time shares were held in a money market fund.
The following table sets forth the rates of the CDSC applicable to redemption of Class B shares:
CDSC as a
Percentage of Dollars
Year Since Purchase Invested or
Payment Made Redemption Proceeds
------------------- ---------------------
First........ 5.0%
Second....... 4.0%
Third........ 3.0%
Fourth....... 2.0%
Fifth........ 1.0%
Sixth........ 1.0%
Seventh...... None
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In determining whether a CDSC is applicable to a redemption, the calculation will be made in a manner that results in the lowest possible rate. It will be assumed that the redemption is made first of amounts representing shares acquired pursuant to the
reinvestment of dividends and distributions; then of amounts representing the increase in NAV above the total amount of payments for the purchase of Class A shares made during the preceding 12 months (in certain cases), six years for Class B shares and 18 months for Class C shares; then of amounts representing the cost of shares held beyond the applicable CDSC period; and finally, of amounts representing the cost of shares held for the longest period of time within the applicable CDSC period.
For example, assume you purchased 100 Class B shares at $10 per share for a cost of $1,000. Subsequently, you acquired 5 additional Class B shares through dividend reinvestment. During the second year after the purchase you decide to redeem $500 of your investment. Assuming at the time of the redemption the NAV had appreciated to $12 per share, the value of your Class B shares would be $1,260 (105 shares at $12 per share). The CDSC would not be applied to the value of the reinvested dividend shares and the amount that represents appreciation ($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would be charged at a rate of 4% (the applicable rate in the second year after purchase) for a total CDSC of $9.60.
For federal income tax purposes, the amount of the CDSC will reduce the gain, or increase the loss, as the case may be, on the amount recognized on the redemption of shares.
Waiver of Contingent Deferred Sales Charge--Class B Shares. The CDSC will be waived in the case of a redemption following the death or disability of a shareholder or, in the case of a trust account, following the death or disability of the grantor. The waiver is available for total or partial redemptions of shares owned by a person, either individually or in joint tenancy, at the time of death or initial determination of disability, provided that the shares were purchased prior to death or disability.
The CDSC will also be waived in the case of a total or partial redemption in connection with certain distributions made without penalty under the Internal Revenue Code from a tax-deferred retirement plan, an IRA or Section 403(b) custodial account. These distributions are:
(1) in the case of a tax-deferred retirement plan, a lump-sum or other distribution after retirement;
(2) in the case of an IRA (including a Roth IRA), a lump-sum or other distribution after attaining age 59 1/2 or a periodic distribution based on life expectancy;
(3) in the case of a Section 403(b) custodial account, a lump sum or other distribution after attaining age 59 1/2; and
(4) a tax-free return of an excess contribution or plan distributions following the death or disability of the shareholder, provided that the shares were purchased prior to death or disability.
The waiver does not apply in the case of a tax-free rollover or transfer of assets, other than one following a separation from service (that is, following voluntary or involuntary termination of employment or following retirement). Under no circumstances will the CDSC be waived on redemptions resulting from the termination of a tax-deferred retirement plan, unless such redemptions otherwise qualify for a waiver as described above. Shares purchased with amounts used to repay a loan from such plans on which a CDSC was not previously deducted will thereafter be subject to a CDSC without regard to the time such amounts were previously invested. In the case of a 401(k) plan, the CDSC will also be waived upon the redemption of shares purchased with amounts used to repay loans made from the account to the participant and from which a CDSC was previously deducted.
Systematic Withdrawal Plan. The CDSC will be waived (or reduced) on certain redemptions effected through a Systematic Withdrawal Plan. On an annual basis, up to 12% of the total dollar amount subject to the CDSC may be redeemed without charge. The transfer agent will calculate the total amount available for this waiver annually on the anniversary date of your purchase. The CDSC will be waived (or reduced) on redemptions until this threshold 12% is reached. The Systematic Withdrawal Plan is not available to participants in certain retirement plans. Please contact PMFS for more details.
In addition, the CDSC will be waived on redemptions of shares held by Trustees of the Trust.
You must notify the transfer agent either directly or through your broker at the time of redemption that you are entitled to waiver of the CDSC and provide the transfer agent with such supporting documentation as it may deem appropriate. The waiver will be granted subject to confirmation of your entitlement. In connection with these waivers, the transfer agent will require you to submit the supporting documentation set forth below.
Category of Waiver Required Documentation
Death A copy of the shareholder's death certificate or, in the case of a
trust, a copy of the grantor's death certificate, plus a copy of the
trust agreement identifying the grantor.
Disability--An individual will be considered A copy of the Social Security Administration award letter or a
disabled if he or she is unable to engage in any letter from a physician on the physician's letterhead stating that
substantial gainful activity by reason of any the shareholder (or, in the case of a trust, the grantor (a copy of
medically determinable physical or mental the trust agreement identifying the grantor will be required as
impairment that can be expected to result in well)) is permanently disabled. The letter must also indicate the
death or to be of long-continued and indefinite date of disability.
duration.
Distribution from an IRA or 403(b) Custodial A copy of the distribution form from the custodial firm indicating
Account (i) the date of birth of the shareholder and (ii) that the shareholder
is over age 59 1/2 and is taking a normal distribution--signed by
the shareholder.
Distribution from Retirement Plan A letter signed by the plan administrator/trustee indicating the
reason for the distribution.
Excess Contributions A letter from the shareholder (for an IRA) or the plan
administrator/trustee on company letterhead indicating the
amount of the excess and whether or not taxes have been paid.
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PMFS reserves the right to request such additional documents as it may deem appropriate.
Waiver of Contingent Deferred Sales Charge--Class C Shares
The CDSC will be waived on redemptions from Benefit Plans holding shares through a broker for which the broker provides administrative or recordkeeping services.
Conversion Feature--Class B Shares
Class B shares will automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. Conversions will be effected at relative net asset value without the imposition of any additional sales charge.
Since each Fund tracks amounts paid rather than the number of shares bought
on each purchase of Class B shares, the number of Class B shares eligible to
convert to Class A shares (excluding shares acquired through the automatic
reinvestment of dividends and other distributions) (Eligible Shares) will be
determined on each conversion date in accordance with the following formula:
(1) the ratio of (a) the amounts paid for Class B shares purchased at least
seven years prior to the conversion date to (b) the total amount paid for all
Class B shares purchased and then held in your account (2) multiplied by the
total number of Class B shares purchased and then held in your account. Each
time any Eligible Shares in your account convert to Class A shares, all shares
or amounts representing Class B shares then in your account that were acquired
through the automatic reinvestment of dividends and other distributions will
convert to Class A shares.
For purposes of determining the number of Eligible Shares, if the Class B shares in your account on any conversion date are the result of multiple purchases at different net asset values per share, the number of Eligible Shares calculated as described above will generally be either more or less than the number of shares actually purchased approximately seven years before such conversion date. For example, if 100 shares were initially purchased at $10 per share (for a total of $1,000) and a second purchase of 100 shares was subsequently made at $11 per share (for a total of $1,100), 95.24 shares would convert approximately seven years from the initial purchase (that is, $1,000 divided by $2,100 (47.62%), multiplied by 200 shares equals 95.24 shares). The Manager reserves the right to modify the formula for determining the number of Eligible Shares in the future as it deems appropriate on notice to shareholders.
Since annual distribution-related fees are lower for Class A shares than Class B shares, the per share NAV of the Class A shares may be higher than that of the Class B shares at the time of conversion. Thus, although the aggregate dollar value will be the same, you may receive fewer Class A shares than Class B shares converted.
For purposes of calculating the applicable holding period for conversions, all payments for Class B shares during a month will be deemed to have been made on the last day of the month, or for Class B shares acquired through exchange, or a series of exchanges, on the last day of the month in which the original payment for purchases of such Class B shares was made. For Class B shares previously exchanged for shares of a money market fund, the time period during which such shares were held in the money market fund will be excluded. For example, Class B shares held in a money market fund for one year would not convert to Class A shares until approximately eight years from purchase. For purposes of measuring the time period during which shares are held in a money market fund, exchanges will be deemed to have been made on the last day of the month. Class B shares acquired through exchange will convert to Class A shares after expiration of the conversion period applicable to the original purchase of such shares.
The conversion feature may be subject to the continuing availability of opinions of counsel or rulings of the Internal Revenue Service (1) that the dividends and other distributions paid on Class A, Class B, Class C and Class Z shares will not constitute "preferential dividends" under the Internal Revenue Code and (2) that the conversion of shares does not constitute a taxable event. The conversion of Class B shares into Class A shares may be suspended if such opinions or rulings are no longer available. If conversions are suspended, Class B shares of a Fund will continue to be subject, possibly indefinitely, to their higher annual distribution and service fee.
SHAREHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of Fund shares, a Shareholder Investment Account is established for each investor under which a record of the shares held is maintained by the transfer agent. If a share certificate is desired, it must be requested in writing for each transaction. Certificates are issued only for full shares and may be redeposited in the Account at any time. There is no charge to the investor for issuance of a certificate. Each Fund makes available to its shareholders the following privileges and plans.
Automatic Reinvestment of Dividends and Distributions
For the convenience of investors, all dividends and distributions are automatically reinvested in full and fractional shares of the Funds. An investor may direct the transfer agent in writing not less than five full business days prior to the record date to have subsequent dividends or distributions sent in cash rather than reinvested. In the case of recently purchased shares for which registration instructions have not been received on the record date, cash payment will be made directly to the broker. Any shareholder who receives a cash payment representing a dividend or distribution may reinvest such dividend or distribution at NAV by returning the check or the proceeds to the transfer agent within 30 days after the payment date. Such investment will be made at the NAV per share next determined after receipt of the check or proceeds by the transfer agent. Such shareholder will receive credit for any CDSC paid in connection with the amount of proceeds being reinvested.
Exchange Privilege
Each Fund makes available to its shareholders the privilege of exchanging their shares of the Fund for shares of the other mutual funds that the Trust offers and other Strategic Partners mutual funds, including Special Money Market Fund, Inc. (Money Fund), subject in each case to the minimum investment requirements of such funds. Shares of such other Strategic Partners mutual funds may also be exchanged for shares of each Fund. All exchanges are made on the basis of the relative NAV next determined after receipt of an order in proper form. An exchange will be treated as a redemption and purchase for tax purposes. For retirement and group plans offering only certain of the Strategic Partners mutual funds, the exchange privilege is available for those funds eligible for investment in the particular program.
It is contemplated that the exchange privilege may be applicable to new Strategic Partners mutual funds whose shares may be distributed by the Distributor.
In order to exchange shares by telephone, you must authorize telephone exchanges on your initial application form or by written notice to the transfer agent and hold shares in non-certificate form. Thereafter, you may call the mutual fund whose shares you wish to exchange at (800) 225-1852 to execute a telephone exchange of shares, on weekdays, except holidays, between the hours of 8:00 a.m. and 6:00 p.m. New York time. For your protection and to prevent fraudulent exchanges, your telephone call will
be recorded and you will be asked to provide your personal identification number. A written confirmation of the exchange transaction will be sent to you. Neither the Fund nor its agents will be liable for any loss, liability or cost which results from acting upon instructions reasonably believed to be genuine under the foregoing procedures. All exchanges will be made on the basis of the relative NAV of the two funds next determined after the request is received in good order.
If you hold shares through Prudential Securities, you must exchange your shares by contacting your Prudential Securities financial adviser.
If you hold certificates, the certificates must be returned in order for the shares to be exchanged.
You may also exchange shares by mail by writing to Prudential Mutual Fund Services LLC, Attention: Exchange Processing, P.O. Box 8157, Philadelphia, PA 19101.
In periods of severe market or economic conditions the telephone exchange of shares may be difficult to implement and you should make exchanges by mail by writing to Prudential Mutual Fund Services LLC, at the address noted above.
Class A. Shareholders of a Fund may exchange their Class A shares for Class A shares of other Strategic Partners mutual funds, and shares of Money Fund. No fee or sales load will be imposed upon the exchange. Shareholders of Money Fund who acquired such shares upon exchange of Class A shares may use the exchange privilege only to acquire Class A shares of Strategic Partners mutual funds.
Class B and Class C. Shareholders of a Fund may exchange their Class B and Class C shares of the Fund for Class B and Class C shares, respectively, of other Strategic Partners mutual funds and shares of Money Fund. No CDSC will be payable upon such exchange, but a CDSC may be payable upon the redemption of the Class B and Class C shares acquired as a result of an exchange. The applicable sales charge will be that imposed by the fund in which shares were initially purchased and the purchase date will be deemed to be the first day of the month after the initial purchase, rather than the date of the exchange.
Class B and Class C shares of a Fund may also be exchanged for shares of Money Fund without imposition of any CDSC at the time of exchange. Upon subsequent redemption from such money market fund or after re-exchange into the Fund, such shares will be subject to the CDSC calculated without regard to the time such shares were held in the money market fund. In order to minimize the period of time in which shares are subject to a CDSC, shares exchanged out of the money market fund will be exchanged on the basis of their remaining holding periods, with the longest remaining holding periods being transferred first. In measuring the time period shares are held in Money Fund and "tolled" for purposes of calculating the CDSC holding period, exchanges are deemed to have been made on the last day of the month. Thus, if shares are exchanged into a Fund from Money Fund during the month (and are held in the Fund at the end of the month), the entire month will be included in the CDSC holding period. Conversely, if shares are exchanged into Money Fund prior to the last day of the month (and are held in Money Fund on the last day of the month), the entire month will be excluded from the CDSC holding period. For purposes of calculating the seven-year holding period applicable to the Class B conversion feature, the time period during which Class B shares were held in a money market fund will be excluded.
At any time after acquiring shares of other Strategic Partners mutual funds participating in the Class B or Class C exchange privilege, a shareholder may again exchange those shares (and any reinvested dividends and distributions) for Class B or Class C shares of a Fund, respectively, without subjecting such shares to any CDSC. Shares of any fund participating in the Class B or Class C exchange privilege that were acquired through reinvestment of dividends or distributions may be exchanged for Class B or Class C shares of other funds, respectively, without being subject to any CDSC.
Class Z. Class Z shares may be exchanged for Class Z shares of other Strategic Partners mutual funds.
Dollar Cost Averaging
Dollar cost averaging is a method of accumulating shares by investing a fixed amount of dollars in shares at set intervals. An investor buys more shares when the price is low and fewer shares when the price is high. The average cost per share is lower than it would be if a constant number of shares were bought at set intervals.
Dollar cost averaging may be used, for example, to plan for retirement, to save for a major expenditure, such as the purchase of a home, or to finance a college education. The cost of a year's education at a four-year college today averages around $22,500 at
a private college and around $10,600 at a public university. Assuming these costs increase at a rate of 7% a year, the cost of one year at a private college could reach $44,300 and over $21,000 at a public university in 10 years.1
The following chart shows how much you would need in monthly investments to achieve specified lump sums to finance your investment goals.2
Period of
Monthly Investments: $100,000 $150,000 $200,000 $250,000
-------------------- -------- -------- -------- --------
25 Years...... $ 105 $ 158 $ 210 $ 263
20 Years...... 170 255 340 424
15 Years...... 289 438 578 722
10 Years...... 547 820 1,093 1,366
5 Years....... 1,361 2,041 2,721 3,402
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Automatic Investment Plan (AIP)
Under AIP, an investor may arrange to have a fixed amount automatically invested in shares of a Fund monthly by authorizing his or her bank account or brokerage account to be debited to invest specified dollar amounts in shares of the Fund. The investor's bank must be a member of the Automated Clearing House System.
Further information about this program and an application form can be obtained from the transfer agent, the Distributor or your broker.
Systematic Withdrawal Plan
A systematic withdrawal plan is available to shareholders through the transfer agent, the Distributor or your broker. Such withdrawal plan provides for monthly or quarterly redemption checks in any amount, except as provided below, up to the value of the shares in the shareholder's account. Systematic withdrawals of Class B or Class C shares may be subject to a CDSC.
In the case of shares held through the transfer agent, the shareholder must elect to have all dividends and/or distributions automatically reinvested in additional full and fractional shares at NAV on shares held under this plan.
The transfer agent, the Distributor or your broker acts as an agent for the shareholder in redeeming sufficient full and fractional shares to provide the amount of the systematic withdrawal. The systematic withdrawal plan may be terminated at any time, and the Distributor reserves the right to initiate a fee of up to $5 per withdrawal, upon 30 days' written notice to the shareholder.
Systematic withdrawals should not be considered as dividends, yield or income. If systematic withdrawals continuously exceed reinvested dividends and distributions, the shareholder's original investment will be correspondingly reduced and ultimately exhausted.
Furthermore, each systematic withdrawal constitutes a redemption of shares,
and any gain or loss realized must be recognized for federal income tax
purposes. In addition, systematic withdrawals made concurrently with purchases
of additional shares are inadvisable because of the sales charges applicable to
(1) the purchase of Class A and Class C shares and (2) the redemption of Class
B and Class C shares. Each shareholder should consult his or her own tax
adviser with regard to the tax consequences of the plan, particularly if used
in connection with a retirement plan.
Tax-Deferred Retirement Accounts
Individual Retirement Accounts. An IRA permits the deferral of federal income tax on income earned in the account until the earnings are withdrawn. The following chart represents a comparison of the earnings in a personal savings account with those in an IRA, assuming a $2,000 annual contribution, an 8% rate of return and a 38.6% federal income tax bracket and shows how much more retirement income can accumulate within an IRA as opposed to a taxable individual savings account.
Tax-Deferred Compounding1
Contributions Personal Made Over: Savings IRA ---------- -------- -------- 10 years $ 26,283 $ 31,291 15 years 44,978 58,649 20 years 68,739 98,846 25 years 98,936 157,909 30 years 137,316 244,692 |
1The chart is for illustrative purposes only and does not represent the performance of a Fund or any specific investment. It shows taxable versus tax-deferred compounding for the periods and on the terms indicated. Earnings in a traditional IRA will be subject to tax when withdrawn from the account. Distributions from a Roth IRA that meet the conditions required under the Internal Revenue Code will not be subject to tax upon withdrawal from the account.
NET ASSET VALUE
Each Fund's NAV is determined by subtracting its liabilities from the value of its assets and dividing the remainder by the number of outstanding shares. NAV is calculated separately for each class. Each Fund will compute its NAV once each business day at the close of regular trading on the NYSE, usually 4:00 p.m. New York time. A Fund may not compute its NAV on days on which no orders to purchase, sell or redeem Fund shares have been received or days on which changes in the value of the Fund's portfolio securities do not materially affect its NAV. The NYSE is closed on the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Under the 1940 Act, the Board is responsible for determining in good faith the fair value of securities of each Fund. In accordance with procedures adopted by the Board, the value of investments listed on a securities exchange and Nasdaq National Market System securities (other than options on stock and stock indexes) are valued at the last sales price on such exchange system on the day of valuation, or, if there was no sale on such day, the mean between the last bid and asked prices on such day or at the last bid price on such day in the absence of an asked price. Corporate bonds (other than convertible debt securities) and U.S. government securities that are actively traded in the over-the-counter market, including listed securities for which the primary market is believed by an Adviser, in consultation with the Manager to be over-the-counter, are valued by an independent pricing agent or more than one principal market maker (if available, otherwise by a principal market maker or a primary market dealer). Convertible debt securities that are actively traded in the over-the-counter market, including listed securities for which the primary market is believed by an Adviser in consultation with the Manager to be over-the-counter, are valued by an independent pricing agent or at the mean between the last reported bid and asked prices (or at the last bid price in the absence of an asked price) provided by more than one principal market maker (if available, otherwise by a principal market maker or a primary market dealer). Options on stock and stock indexes traded on an exchange are valued at the last sale price on such exchange or, if there was no such sale on such day, at the mean between the most recently quoted bid and asked prices on the respective exchange or at the last bid price on such day in the absence of an asked price and futures contracts and options thereon are valued at their last sale prices as of the close of trading on the applicable commodities exchange or board of trade or, if there was no sale on the applicable commodities exchange or board of trade on such day, at the mean between the most recently quoted bid and asked prices on such exchange or board of trade or at the last bid price on such day in the absence of an asked price. Quotations of foreign securities in a foreign currency are converted to U.S. dollar equivalents at the current rate obtained from a recognized bank, dealer or independent service, and foreign currency forward contracts are valued at the current cost of covering or offsetting such contracts calculated on the day of valuation. Should an extraordinary event, which is likely to affect the value of the security, occur after the close of an exchange on which a portfolio security is traded, such security will be valued at fair value considering factors determined in good faith by an Adviser under procedures established by and under the general supervision of the Board.
Securities or other assets for which reliable market quotations are not readily available or for which the pricing agent or principal market maker does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the applicable Adviser or the Manager (or Valuation Committee or Board), does not represent fair value, (Fair Value Securities) are valued by the Valuation Committee or Board in consultation with the Manager and Adviser, including, as applicable, their portfolio managers, traders, research and credit analysts and legal compliance personnel on the basis of the following factors: nature of any restrictions on disposition of the securities, assessment of the general liquidity/illiquidity of the securities, the issuer's financial condition and the market in which it does business, cost of the investment, transactions in comparable securities, the size of the holding and the capitalization of the issuer, the prices of any recent transactions or bids/offers for such securities or any comparable securities, any available analyst, media or other report or information deemed reliable by the Manager or Advisers regarding the issuer or the markets or industry in which it operates; other analytical data; and consistency with valuation of similar securities held by other Prudential or Strategic Partners mutual funds, and such other factors as may be determined by the Advisers, Manager, Board or Valuation Committee to materially affect the value of security. Fair Value Securities may include, but are not limited to, the following: certain private placements and restricted securities that do not have an active trading market; securities whose trading has been suspended or for which market quotes are no longer available; debt securities that have recently gone into default and for which there is no current market; securities whose prices are stale; securities denominated in currencies that are restricted, untraded or for which exchange rates are disrupted; securities affected by significant events; and securities that the Adviser or Manager believe were priced incorrectly. A "significant event" (which includes, but is not limited to, an extraordinary political or market event) is an event that the Adviser or Manager believes with a reasonably high degree of certainty has caused the closing market prices of a Fund's portfolio securities to no longer reflect their value at the time of the Fund's NAV calculation. On a day that the Manager determines that one or more of a Fund's portfolio securities constitute Fair Value Securities, the Manager may determine the fair value of these securities without the supervision of the Valuation Committee if the fair valuation of all such securities results in a change of less than $0.01 to the Fund's NAV and the Manager presents these valuations to the Board for its ratification. Debt investments are valued at cost, with interest accrued or discount amortized to the date of maturity, if their original maturity was 60 days or less, unless such valuation, in the judgment of the Adviser or Manager does not represent fair value. Debt securities with remaining maturities of more than 60 days, for which market quotations are readily available, are valued at their current market quotations as supplied by an independent pricing agent or more than one principal market maker (if available otherwise a primary market dealer).
Although the legal rights of each class of shares are substantially identical, the different expenses borne by each class will result in different NAVs and dividends. The NAV of Class B and Class C shares will generally be lower than the NAV of Class A shares as a result of the larger distribution-related fee to which Class B and Class C shares are subject. The NAV of Class Z shares will generally be higher than the NAV of Class A, Class B or Class C shares because Class Z shares are not subject to any distribution or service fee. It is expected, however, that the NAV of the four classes will tend to converge immediately after the recording of dividends, if any, that will differ by approximately the amount of the distribution and/or service fee expense accrual differential among the classes.
TAXES, DIVIDENDS AND DISTRIBUTIONS
Each Fund has elected to qualify and intends to remain qualified as a regulated investment company under Subchapter M of the Code. This relieves a Fund (but not its shareholders) from paying federal income tax on income and capital gains that are distributed to shareholders, and permits net capital gains of the Fund (that is, the excess of net long-term capital gains over net short-term capital losses) to be treated as long-term capital gains of its shareholders, regardless of how long shareholders have held their shares in the Fund. Net capital gains of a Fund that are available for distribution to shareholders will be computed by taking into account any capital loss carryforward of the Fund. For federal income tax purposes, the Focused Growth Fund has a capital loss carryforward as of February 28, 2002 of approximately $114,236,000, of which $26,355,000 expires in 2008 and $87,881,000 expires in 2009. The New Era Growth Fund, as of February 28, 2002, has post-October capital losses of approximately $34,354,000 and a capital loss carryforward of approximately $60,533,000, which expires in 2010. The Focused Value Fund, as of February 28, 2002, has a capital loss carryforward of approximately $1,294,000, which expires in 2010. Accordingly, no capital gains distribution is expected to be paid to shareholders until net gains have been realized in excess of such capital loss carryforward.
Qualification of a Fund as a regulated investment company requires, among other things, that (a) the Fund derive at least 90% of its annual gross income from interest, dividends, payments with respect to certain securities loans and gains from the sale or other disposition of stocks, securities or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stocks, securities or currencies; (b) the Fund diversify its holdings so that, at the end of each quarter of the taxable year, (1) at least 50% of the value of the Fund's assets is represented by cash, U.S. government securities and other securities limited in respect of any one issuer to an amount not greater
than 5% of the value of the Fund's assets and not more than 10% of the outstanding voting securities of such issuer, and (2) not more than 25% of the value of its assets is invested in the securities of any one issuer (other than U.S. government securities) or securities of other regulated investment companies; and (c) the Fund distribute to its shareholders at least 90% of its net investment income and net short-term capital gains (that is, the excess of net short-term capital gains over net long-term capital losses) in each year.
Gains or losses on sales of securities by a Fund generally will be treated as long-term capital gains or losses if the securities have been held by it for more than one year, except in certain cases where the Fund acquires a put or writes a call, or otherwise holds an offsetting position, with respect to the securities. Long term capital gains are taxed at a rate of up to 20%. Other gains or losses on the sale of securities will be short-term capital gains or losses taxable of ordinary income tax rates. Gains and losses on the sale, lapse or other termination of options on securities will be treated as gains and losses from the sale of securities. If an option written by a Fund on securities lapses or is terminated through a closing transaction, such as a repurchase by the Fund of the option from its holder, the Fund will generally realize short-term capital gain or loss. If securities are sold by a Fund pursuant to the exercise of a call option written by it, the Fund will include the premium received in the sale proceeds of the securities delivered in determining the amount of gain or loss on the sale. Certain of each Fund's transactions may be subject to wash sale, short sale, constructive sale, anti-conversion and straddle provisions of the Code that may, among other things, require the Fund to defer recognition of losses. In addition, debt securities acquired by a Fund may be subject to original issue discount and market discount rules that, respectively, may cause the Fund to accrue income in advance of the receipt of cash with respect to interest or cause gains to be treated as ordinary income.
Special rules apply to certain options on stock indexes, futures contracts and options thereon. These investments will generally constitute Section 1256 contracts and will be required to be "marked to market" for federal income tax purposes at the end of each Fund's taxable year; that is, treated as having been sold at their market value on the last business day of the Fund's fiscal year. Except with respect to certain foreign currency forward contracts, sixty percent of any gain or loss recognized on these deemed sales and on actual dispositions will be treated as long-term capital gain or loss, and the remainder will be treated as short-term capital gain or loss.
Gain or loss on the sale, lapse or other termination of options on stock and on narrowly-based stock indexes will be capital gain or loss and will be long-term or short-term depending on the holding period of the option. In addition, positions that are part of a "straddle" will be subject to certain wash sale, short sale and constructive sale provisions of the Code. In the case of a straddle, a Fund may be required to defer the recognition of losses on positions it holds to the extent of any unrecognized gain on offsetting positions held by the Fund.
Gains or losses attributable to fluctuations in exchange rates that occur between the time a Fund accrues interest or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities are treated as ordinary income or ordinary loss. Similarly, gains or losses on dispositions of debt securities denominated in a foreign currency attributable to fluctuations in the value of the foreign currency between the date of acquisition of the security and the date of disposition also are treated as ordinary gain or loss. These gains or losses, referred to under the Code as "Section 988" gains or losses, increase or decrease the amount of a Fund's investment company taxable income available to be distributed to its shareholders as ordinary income, rather than increasing or decreasing the amount of the Fund's net capital gain. If Section 988 losses exceed other investment company taxable income during a taxable year, a Fund would not be able to make any ordinary dividend distributions, or distributions made before the losses were realized would be recharacterized as a return of capital to shareholders, rather than as an ordinary dividend, thereby reducing each shareholder's basis in his or her Fund shares.
Shareholders electing to receive dividends and distributions in the form of additional shares will have a cost basis for federal income tax purposes in each share so received equal to the NAV of a share of a Fund on the reinvestment date.
Any dividends or distributions paid shortly after a purchase by an investor may have the effect of reducing the per share net asset value of the investor's shares by the per share amount of the dividends or distributions. Furthermore, such dividends or distributions, although in effect a return of capital, are subject to federal income taxes. In addition, dividends and capital gains distributions may also be subject to state and local income taxes. Therefore, prior to purchasing shares of a Fund, the investor should carefully consider the impact of dividends or capital gains distributions that are expected to be or have been announced.
Any loss realized on a sale, redemption or exchange of shares of a Fund by a shareholder will be disallowed to the extent the shares are replaced within a 61-day period beginning 30 days before and ending 30 days after the disposition of shares. Shares purchased pursuant to the reinvestment of a dividend will constitute a replacement of shares.
A shareholder who acquires shares of a Fund and sells or otherwise disposes of such shares within 90 days of acquisition may not be allowed to include certain sales charges incurred in acquiring such shares for purposes of calculating gain or loss realized upon a sale or exchange of shares of the Fund.
Dividends of net investment income and distributions of net short-term capital gains paid to a shareholder (including a shareholder acting as a nominee or fiduciary) who is a nonresident alien individual or a foreign entity (foreign shareholder) are subject to a 30% (or lower treaty rate) withholding tax upon the gross amount of the dividends unless, in general, the dividends are effectively connected with a U.S. trade or business conducted by the foreign shareholder. Capital gain distributions paid to a foreign shareholder are generally not subject to withholding tax. A foreign shareholder will, however, be required to pay U.S. income tax on any dividends and capital gain distributions that are effectively connected with a U.S. trade or business of the foreign shareholder. Foreign shareholders should consult their own tax advisers with respect to the particular tax consequences to them of an investment in a Fund.
Dividends received by corporate shareholders generally are eligible for a dividends-received deduction of 70% to the extent the Fund's income is derived from qualified dividends received by the Fund from domestic corporations. Dividends attributable to foreign corporations, interest income, capital and currency gain, gain or loss from Section 1256 contracts (described above), and income from certain other sources will not constitute qualified dividends. Individual shareholders are not eligible for the dividends-received deduction.
The per share dividends on Class B and Class C shares generally will be lower than the per share dividends on Class A and Class Z shares as a result of the higher distribution-related fee applicable to the Class B and Class C shares. The per share distributions of net capital gains, if any, will be paid in the same amount for Class A, Class B, Class C and Class Z shares. See "Net Asset Value."
Each Fund is required to distribute 98% of its ordinary income in the same calendar year in which it is earned. Each Fund is also required to distribute during the calendar year 98% of the capital gain net income it earned during the 12 months ending on October 31 of such calendar year. In addition, each Fund must distribute during the calendar year all undistributed ordinary income and undistributed capital gain net income from the prior year or the twelve-month period ending on October 31 of such prior calendar year, respectively. To the extent it does not meet these distribution requirements, a Fund will be subject to a nondeductible 4% excise tax on the undistributed amount. For purposes of this excise tax, income on which the Fund pays income tax is treated as distributed.
Each Fund may, from time to time, invest in "passive foreign investment companies" (PFICs). A PFIC is a foreign corporation that, in general, meets either of the following tests: (a) at least 75% of its gross income is passive or (b) an average of at least 50% of its assets produce, or are held for the production of, passive income. If a Fund acquires and holds stock in a PFIC beyond the end of the year of its acquisition, the Fund will be subject to federal income tax on a portion of any "excess distribution" received on the stock or on any gain from disposition of the stock (collectively, PFIC income), plus certain interest charges, even if the Fund distributes the PFIC income as a taxable dividend to its shareholders. The balance of the PFIC income will be included in a Fund's investment company taxable income and, accordingly, will not be taxable to it to the extent that income is distributed to its shareholders. A Fund may make a "mark-to-market" election with respect to any marketable stock it holds of a PFIC. If the election is in effect, at the end of a Fund's taxable year, the Fund will recognize the amount of gains, if any, as ordinary income with respect to PFIC stock. No ordinary loss will be recognized on PFIC stock, except to the extent of gains recognized in prior years. Alternatively, a Fund, if it meets certain requirements, may elect to treat any PFIC in which it invests as a "qualified electing fund," in which case, in lieu of the foregoing tax and interest obligation, the Fund will be required to include in income each year its pro rata share of the qualified electing fund's annual ordinary earnings and net capital gain, even if they are not distributed to the Fund; those amounts would be subject to the distribution requirements applicable to the Fund described above.
Income received by a Fund from sources within foreign countries may be subject to withholding and other taxes imposed by such countries. Income tax treaties between certain countries and the United States may reduce or eliminate such taxes. It is impossible to determine in advance the effective rate of foreign tax to which the Fund will be subject, since the amount of a Fund's assets to be invested in various countries will vary. Neither Fund expects to meet the requirements of the Internal Revenue Code for "passing-through" to its shareholders any foreign income taxes paid.
Shareholders are advised to consult their own tax advisers with respect to the federal, state and local income tax consequences resulting from their investment in a Fund.
PERFORMANCE INFORMATION
Average Annual Total Return. A Fund may from time to time advertise its average annual total return. Average annual total return is determined separately for Class A, Class B, Class C and Class Z shares.
Average annual total return is computed according to the following formula:
P(1 + T)/n/ = ERV
Where: P = hypothetical initial payment of $1000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment of the 1, 5 or
10 year period at the end of the 1, 5 or 10 year periods (or fractional portion thereof).
|
Average annual total return takes into account any applicable initial or deferred sales charges but does not take into account any federal or state income taxes that may be payable upon redemption. The average annual returns for the one-year and since-inception periods ended February 28, 2002 are set forth in the following table. No information for the Focused Value Fund is shown in the following table because the Fund did not have a full year of operations as of February 28, 2002.
Average Annual Total Returns
Fund One Year Since Inception ---- -------- --------------- Focused Growth/1/ Class A....... -22.57% -27.86% Class B....... -23.19% -27.99% Class C....... -20.76% -26.71% Class Z....... -18.33% -25.57% New Era Growth/2/ Class A....... -31.56% -31.41% Class B....... -32.11% -31.35% Class C....... -29.96% -30.22% Class Z....... -27.89% -28.41% |
/1/ The Focused Growth Fund commenced operations on June 2, 2000.
/2/ The New Era Growth Fund commenced operations on November 22, 2000.
Average Annual Total Return (After Taxes on Distributions and After Taxes on Distributions and Redemption).
Average annual total return (after taxes on distributions and after taxes on distributions and redemption) each takes into account any applicable initial or contingent deferred sales charges and takes into account federal income taxes that may be payable upon receiving distributions and following redemption. Federal income taxes are calculated using the highest marginal income tax rates in effect on the reinvestment date.
Average annual total return (after taxes on distributions) is computed according to the following formula:
P(1+T)/n/ = ATV\\D\\
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return (after taxes on distributions).
n = number of years.
ATV\\D\\ = ending value of a hypothetical $1,000 payment made at the
beginning of the 1-, 5- or 10-year periods at the end of the 1-,
5- or 10-year periods (or fractional portion), after taxes on
fund distributions but not after taxes on redemption.
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The average annual total returns (after taxes on distributions) for the one-year and since-inception periods ended February 28, 2002 are set forth in the following table. No information for the Focused Value Fund is shown in the following table because the Fund did not have a full year of operations as of February 28, 2002.
Average Annual Total Returns (After Taxes on Distributions)
Fund One Year Since Inception ---- -------- --------------- Focused Growth/1/ Class A....... -22.57% -27.86% Class B....... -14.24% -27.49% Class C....... -12.74% -26.71% Class Z....... -11.26% -25.57% New Era Growth/2/ Class A....... -31.56% -31.41% Class B....... -32.11% -31.35% Class C....... -29.96% -30.22% Class Z....... -27.89% -28.41% |
/1/ The Focused Growth Fund commenced operations on June 2, 2000.
/2/ The New Era Growth Fund commenced operations on November 22, 2000.
Average annual total return (after taxes on distributions and redemption) is computed according to the following formula:
P(1 + T) /n /= ATV\\DR\\
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return (after taxes on distributions and
redemption).
n = number of years.
ATV\\DR\\ = ending value of a hypothetical $1,000 payment made at the
beginning of the 1-, 5- or 10-year periods at the end of the 1-,
5- or 10-year periods (or fractional portion), after taxes on
fund distributions and redemption.
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The average annual total returns (after taxes on distributions and redemption) for the one-year and since-inception periods ended February 28, 2002 are set forth in the following table. No information for the Focused Value Fund is shown in the following table because the Fund did not have a full year of operations as of February 28, 2002.
Average Annual Total Returns (After Taxes on Distributions and Redemption)
Fund One Year Since Inception ---- -------- --------------- Focused Growth/1/ Class A...................................................... -13.86% -21.70% Class B...................................................... -14.24% -21.80% Class C...................................................... -12.74% -20.84% Class Z...................................................... -11.26% -19.97% New Era Growth/2/ Class A...................................................... -19.38% -24.86% Class B...................................................... -19.72% -24.81% Class C...................................................... -18.40% -23.93% Class Z...................................................... -17.13% -22.52% |
/1/ The Focused Growth Fund commenced operations on June 2, 2000.
/2/ The New Era Growth Fund commenced operations on November 22, 2000.
Aggregate Total Return. A Fund may also advertise its aggregate total return. Aggregate total return is determined separately for Class A, Class B, Class C and Class Z shares.
Aggregate total return represents the cumulative change in the value of an investment in the Fund and is computed according to the following formula:
Where: P = a hypothetical initial payment of $1000.
ERV = ending redeemable value of a hypothetical $1,000 payment of the 1, 5 or
10 year period at the end of the 1, 5 or 10 year periods (or fractional portion thereof).
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Aggregate total return does not take into account any federal or state income taxes that may be payable upon redemption or any applicable initial or contingent deferred sales charges. The aggregate total returns for the one-year and since-inception periods ended February 28, 2002 are set forth in the following table.
Aggregate Total Returns
Fund One Year Since Inception ---- -------- --------------- Focused Growth/1/ Class A....... -18.49% -40.50% Class B....... -19.15% -41.30% Class C....... -19.15% -41.30% Class Z....... -18.33% -40.30% New Era Growth/2/ Class A....... -27.96% -34.80% Class B....... -28.54% -35.40% Class C....... -28.54% -35.40% Class Z....... -27.89% -34.60% Focused Value/3/ Class A....... N/A -5.44% Class B....... N/A -6.09% Class C....... N/A -6.09% Class Z....... N/A -5.16% |
/1/ The Focused Growth Fund commenced operations on June 2, 2000.
/2/ The New Era Growth Fund commenced operations on November 22, 2000.
/3/ The Focused Value Fund commenced operations on March 30, 2001.
FINANCIAL STATEMENTS
The Funds' financial statements for the fiscal periods ended February 28, 2002, incorporated in this SAI by reference to the Trust's 2002 annual report to shareholders (File No. 811-9805), have been so incorporated in reliance on the reports of PricewaterhouseCoopers LLP, independent accountants, given on authority of said firm as experts in auditing and accounting. You may obtain a copy of the Trust's annual report at no charge by request to the Trust by calling (800) 225-1852, or by writing to the Trust at Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102-4077.
Advertising. Advertising materials for a Fund may include biographical information relating to its portfolio manager(s), and may include or refer to commentary by the Fund's manager(s) concerning investment style, investment discipline, asset growth, current or past business experience, business capabilities, political, economic or financial conditions and other matters of general interest to investors. Advertising materials for a Fund also may include mention of Prudential or Strategic Partners, its affiliates and subsidiaries, and reference the assets, products and services of those entities.
From time to time, advertising materials for a Fund may include information concerning retirement and investing for retirement, may refer to the approximate number of Fund shareholders and may refer to Lipper rankings or Morningstar ratings, other related analysis supporting those ratings, other industry publications, business periodicals and market indexes. In addition, advertising materials may reference studies or analyses performed by the Manager or its affiliates. Advertising materials for sector funds, funds that focus on market capitalizations, index funds and international/global funds may discuss the potential benefits and risks of that investment style.
The Trust also may include comparative performance information in advertising or marketing a Fund's shares. Such performance information may include data from Lipper, Inc., Morningstar Publications, Inc., other industry publications, business periodicals and market indexes. Set forth below is a chart that compares the performance of different types of investments over the long term and the rate of inflation./1/
[CHART]
PERFORMANCE
COMPARISON OF DIFFERENT
TYPES OF INVESTMENTS
OVER THE LONG TERM
(12/31/1925-12/31/2001)
---------------------------- Common Stocks 10.7% Long-Term Gov't. Bonds 5.3% Inflation 3.1% |
/1/ Source: Ibbotson Associates. Used with permission. All rights reserved. Common stock returns are based on the Standard & Poor's 500 Composite Stock Price Index, a market-weighted, unmanaged index of 500 common stocks in a variety of industry sectors. It is a commonly used indicator of broad stock price movements. This chart is for illustrative purposes only and is not intended to represent the performance of any particular investment or fund. Investors cannot invest directly in an index. Past performance is not a guarantee of future results.
APPENDIX I--GENERAL INVESTMENT INFORMATION
The following terms are used in mutual fund investing.
Asset Allocation
Asset allocation is a technique for reducing risk, providing balance. Asset allocation among different types of securities within an overall investment portfolio helps to reduce risk and to potentially provide stable returns, while enabling investors to work toward their financial goal(s). Asset allocation is also a strategy to gain exposure to better performing asset classes while maintaining investment in other asset classes.
Diversification
Diversification is a time-honored technique for reducing risk, providing "balance" to an overall portfolio and potentially achieving more stable returns. Owning a portfolio of securities mitigates the individual risks (and returns) of any one security. Additionally, diversification among types of securities reduces the risks (and general returns) of any one type of security.
Duration
Debt securities have varying levels of sensitivity to interest rates. As interest rates fluctuate, the value of a bond (or a bond portfolio) will increase or decrease. Longer term bonds are generally more sensitive to changes in interest rates. When interest rates fall, bond prices generally rise. Conversely, when interest rates rise, bond prices generally fall.
Duration is an approximation of the price sensitivity of a bond (or a bond portfolio) to interest rate changes. It measures the weighted average maturity of a bond's (or a bond portfolio's) cash flows, i.e., principal and interest rate payments. Duration is expressed as a measure of time in years--the longer the duration of a bond (or a bond portfolio), the greater the impact of interest rate changes on the bond's (or the bond portfolio's) price. Duration differs from effective maturity in that duration takes into account call provisions, coupon rates and other factors. Duration measures interest rate risk only and not other risks, such as credit risk and, in the case of non-U.S. dollar denominated securities, currency risk. Effective maturity measures the final maturity dates of a bond (or a bond portfolio).
Market Timing
Market timing--buying securities when prices are low and selling them when prices are relatively higher--may not work for many investors because it is impossible to predict with certainty how the price of a security will fluctuate. However, owning a security for a long period of time may help investors offset short-term price volatility and realize positive returns.
Power of Compounding
Over time, the compounding of returns can significantly impact investment returns. Compounding is the effect of continuous investment on long-term investment results, by which the proceeds of capital appreciation (and income distributions, if elected) are reinvested to contribute to the overall growth of assets. The long-term investment results of compounding may be greater than that of an equivalent initial investment in which the proceeds of capital appreciation and income distributions are taken in cash.
Standard Deviation
Standard deviation is an absolute (non-relative) measure of volatility that, for a mutual fund, depicts how widely the returns varied over a certain period of time. When a fund has a high standard deviation, its range of performance has been very wide, implying greater volatility potential. Standard deviation is only one of several measures of a fund's volatility.
APPENDIX II--HISTORICAL PERFORMANCE DATA
The historical performance data contained in this Appendix relies on data obtained from statistical services, reports and other services believed by the Manager to be reliable. The information has not been independently verified by the Manager.
This following chart shows the long-term performance of various asset classes and the rate of inflation.
Each Investment Provides a Different Opportunity
[CHART]
Value of $1.00 invested on
1/1/1926 through 12/31/2001
2001
Small Stocks $7,860.05
Common Stocks $2,279.13
Long-Term Bonds $50.66
Treasury Bills $17.20
Inflation $9.87
Source: Ibbotson Associates. Used with permission. This chart is for illustrative purposes only and is not indicative of the past, present, or future performance of any asset class or any Prudential or Strategic Partners mutual fund.
Generally, stock returns are due to capital appreciation and the reinvestment of gains. Bond returns are due mainly to reinvesting interest. Also, stock prices usually are more volatile than bond prices over the long-term. Small stock returns for 1926-1980 are those of stocks comprising the 5th quintile of the New York Stock Exchange. Thereafter, returns are those of the Dimensional Fund Advisors (DFA) Small Company Fund. Common stock returns are based on the S&P Composite Index, a market-weighted, unmanaged index of 500 stocks (currently) in a variety of industries. It is often used as a broad measure of stock market performance.
Long-term government bond returns are measured using a constant one-bond portfolio with a maturity of roughly 20 years. Treasury bill returns are for a one-month bill. Treasuries are guaranteed by the government as to the timely payment of principal and interest, equities are not. Inflation is measured by the consumer price index (CPI).
II-1
Set forth below is historical performance data relating to various sections of the fixed-income securities market. The chart shows the historical total returns of U.S. Treasury bonds, U.S. mortgage securities, U.S. corporate bonds, U.S. high yield bonds and world government bonds on an annual basis from 1991 through 2001. The total returns of the indexes include accrued interest, plus the price changes (gains or losses) of the underlying securities during the period mentioned. The data is provided to illustrate the varying historical total returns and investors should not consider this performance data as an indication of the future performance of the Fund or of any sector in which the Fund invests.
All information relies on data obtained from statistical services, reports and other services believed by the Manager to be reliable. Such information has not been verified. The figures do not reflect the operating expenses and fees of a mutual fund. See "Risk/Return Summary--Fees and Expenses" in the prospectus. The net effect of the deduction of the operating expenses of a mutual fund on the historical total returns, including the compounded effect over time, could be substantial.
Historical Total Returns of Different Bond Market Sectors
YEAR 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 ------------------------------------------------------------------------------------------------ U.S. Government Treasury Bonds/1/ 15.3% 7.2% 10.7% (3.4)% 18.4% 2.7% 9.6% 10.0% (2.56)% 13.52% 7.23% ------------------------------------------------------------------------------------------------ U.S. Government Mortgage Securities/2/ 15.7% 7.0% 6.8% (1.6)% 16.8% 5.4% 9.5% 7.0% 1.86% 11.16% 8.22% ------------------------------------------------------------------------------------------------ U.S. Investment Grade Corporate Bonds/3/ 18.5% 8.7% 12.2% (3.9)% 22.3% 3.3% 10.2% 8.6% (1.96)% 9.39% 10.40% ------------------------------------------------------------------------------------------------ U.S. High Yield Bonds/4/ 46.2% 15.8% 17.1% (1.0)% 19.2% 11.4% 12.8% 1.6% 2.39% (5.86)% 5.28% ------------------------------------------------------------------------------------------------ World Government Bonds/5/ 16.2% 4.8% 15.1% 6.0% 19.6% 4.1% (4.3)% 5.3% (5.07)% (2.63)% (3.54)% ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------ Difference between highest and lowest returns percent 30.9% 11.0% 10.3% 9.9% 5.5% 8.7% 17.1% 8.4% 7.46% 19.10% 13.94% |
/1/ Lehman Brothers Treasury Bond Index is an unmanaged index made up of over 150 public issues of the U.S. Treasury having maturities of at least one year.
/2/ Lehman Brothers Mortgage-Backed Securities Index is an unmanaged index that includes over 600 15- and 30-year fixed-rate mortgaged-backed securities of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (FNMA), and the Federal Home Loan Mortgage Corporation (FHLMCC).
/3/ Lehman Brothers Corporate Bond Index includes over 3,000 public fixed-rate, nonconvertible investment-grade bonds. All bonds are U.S. dollar-denominated issues and include debt issued or guaranteed by foreign sovereign governments, municipalities, governmental agencies or international agencies. All bonds in the index have maturities of at least one year. Source: Lipper Inc.
/4/ Lehman Brothers High Yield Bond Index is an unmanaged index comprising over 750 public, fixed-rate, nonconvertible bonds that are rated Ba1 or lower by Moody's Investors Service (or rated BB+ or lower by S&P or Fitch Investors Service). All bonds in the index have maturities of at least one year.
/5/ Salomon Smith Barney World Government Index (Non U.S.) includes 800 bonds issued by various foreign governments or agencies, excluding those in the U.S., but including those in Japan, Germany, France, the U.K., Canada, Italy, Australia, Belgium, Denmark, the Netherlands, Spain, Sweden, and Austria. All bonds in the index have maturities of at least one year.
II-2
This chart illustrates the performance of major world stock markets for the period from December 31, 1985 through December 31, 2001. It does not represent the performance of any Prudential or Strategic Partners mutual fund.
Average Annual Total Returns of Major World Stock Markets 12/31/1985 -
12/31/2001 (in U.S. Dollars)
[CHART]
Sweden 15.51%
Spain 15.26%
Hong Kong 14.96%
Netherland 14.03%
Belgium 13.78%
France 13.20%
USA 13.14%
U.K. 12.28%
Switzerland 12.21%
Europe 11.92%
Denmark 11.88%
Australia 9.54%
Germany 8.63%
Canada 8.45%
Italy 7.70%
Norway 6.82%
Austria 4.95%
Japan 3.84%
|
Source: Morgan Stanley Capital International (MSCI) and Lipper Inc. as of
12/31/01. Used with permission. Morgan Stanley Country indexes are unmanaged
indexes which include those stocks making up the largest two-thirds of each
country's total stock market capitalization. Returns reflect the reinvestment
of all distributions. This chart is for illustrative purposes only and is not
indicative of the past, present or future performance of any specific
investment. Investors cannot invest directly in stock indexes.
This chart shows the growth of a hypothetical $10,000 investment made in the
stocks representing the S&P 500 Stock Index with and without reinvested
dividends.
[CHART]
Capital Capital
Appreciation Appreciation
and Reinvesting only
Dividends
-------- --------
1976 $10,000.00 $10,000.00
$9,255.00 $9,159.00
$9,561.34 $9,350.42
$9,294.58 $8,982.95
$9,284.36 $8,850.00
$8,826.64 $8,302.19
$9,577.78 $8,889.98
$10,408.20 $9,542.51
$9,895.05 $8,944.19
$10,596.60 $9,454.01
$10,885.90 $9,576.91
$11,718.70 $10,173.60
$11,735.10 $10,045.40
$11,251.60 $9,500.91
$12,769.40 $10,631.50
$14,202.20 $11,675.50
1980 $15,550.00 $12,634.10
$15,764.50 $12,656.80
$15,402.00 $12,211.30
$13,826.30 $10,811.90
$14,784.50 $11,404.40
$13,703.80 $10,419.00
$13,627.00 $10,200.20
$15,196.80 $11,206.00
$17,970.30 $13,087.50
$19,770.90 $14,234.00
$21,965.50 $15,643.10
$21,936.90 $15,453.80
$22,024.70 $15,347.20
$21,496.10 $14,811.60
$20,943.60 $14,253.20
$22,973.00 $15,454.70
1984 $23,404.90 $15,561.40
$25,553.50 $16,809.40
$27,426.60 $17,849.90
$26,304.80 $16,941.30
$30,829.30 $19,658.70
$35,176.20 $22,228.10
$37,248.10 $23,339.50
$34,648.20 $21,523.70
$36,578.10 $22,533.20
$44,387.50 $27,141.20
$46,615.70 $28,286.50
$49,692.40 $29,947.00
$38,496.70 $22,990.30
$40,683.30 $24,089.20
$43,384.70 $25,447.90
$43,532.20 $25,300.30
1988 $44,872.90 $25,841.70
$48,054.40 $27,438.70
$52,288.00 $29,589.90
$57,877.60 $32,489.70
$59,064.10 $32,886.10
$57,286.30 $31,633.10
$60,883.90 $33,316.00
$52,524.50 $28,478.50
$57,225.50 $30,728.30
$65,523.20 $34,916.60
$65,365.90 $34,539.50
$68,856.40 $36,093.80
$74,619.70 $38,815.20
$72,739.30 $37,569.30
$74,121.40 $37,982.50
$76,456.20 $38,882.70
1992 $80,294.30 $40,550.80
$83,795.10 $42,034.90
$84,197.30 $41,929.90
$86,369.60 $42,709.80
$88,373.40 $43,410.20
$85,024.00 $41,482.80
$85,381.10 $41,345.90
$89,547.70 $43,061.70
$89,529.80 $42,743.10
$98,241.10 $46,602.80
$107,603.00 $50,703.80
$116,147.00 $54,395.10
$123,139.00 $57,327.00
$129,752.00 $60,078.70
$135,565.00 $62,415.70
$139,754.00 $63,969.90
1996 $151,395.00 $68,940.30
$155,468.00 $70,463.90
$182,581.00 $82,379.40
$196,257.00 $88,162.40
$201,889.00 $90,313.60
$230,032.00 $102,533.00
$237,670.00 $105,517.00
$214,093.00 $94,648.50
$259,652.00 $114,402.00
$272,582.00 $119,721.00
$291,772.00 $127,755.00
$273,595.00 $119,374.00
$314,278.00 $136,731.00
$321,475.00 $139,465.00
$312,924.00 $135,379.00
$309,889.00 $133,700.00
$285,655.00 $122,884.00
$251,805.00 $108,003.00
$266,536.00 $113,965.00
$227,435.00 $96,881.20
2001 $251,725.00 $106,850.00
|
Source: Lipper Inc. Used with permission. All rights reserved. This chart is used for illustrative purposes only and is not intended to represent the past, present or future performance of any Prudential mutual fund. Common stock total return is based on the Standard & Poor's 500 Composite Stock Price Index, a market-value-weighted index made up of 500 of the largest stocks in the U.S. based upon their stock market value. Investors cannot invest directly in indexes.
II-3
World Stock Market Capitalization by Region
World Total: 15.9 Trillion
[CHART]
Canada 3.0%
U.S. 45.4%
Europe 33.3%
Pacific Basin 18.4%
|
Source: Morgan Stanley Capital International, December 31, 2001. Used with permission. This chart represents the capitalization of major world stock markets as measured by the Morgan Stanley Capital International (MSCI) World Index. The total market capitalization is based on the value of approximately 1577 companies in 22 countries (representing approximately 60% of the aggregate market value of the stock exchanges). This chart is for illustrative purposes only and does not represent the allocation of any Prudential or Strategic Partners mutual fund.
The chart below shows the historical volatility of general interest rates as measured by the long U.S. Treasury Bond.
Long Term U.S. Treasury Bond Yield in Percent (1926-2001)
[CHART]
1926 3.5439
3.165
3.3994
3.4048
3.3041
4.0725
3.1515
3.356
2.9259
2.7634
1936 2.5541
2.7336
2.5237
2.2589
1.9434
2.036
2.4572
2.4788
2.4601
1.9926
1946 2.1235
2.4319
2.3692
2.091
2.2412
2.6875
2.7876
2.7356
2.719
2.9471
1956 3.4545
3.233
3.817
4.471
3.8031
4.152
3.9541
4.1694
4.2266
4.5002
1966 4.5549
5.5599
5.9776
6.867
6.4761
5.9662
5.9937
7.2562
7.6026
8.0467
1976 7.2087
8.0293
8.9772
10.1151
11.9872
13.339
10.951
11.9663
11.701
9.5579
1986 7.8891
9.2043
9.185
8.1634
8.4436
7.3013
7.2573
6.5444
7.9924
6.028
1996 6.7253
6.0228
5.4235
6.8208
5.5805
2001 5.7509
|
Source: Ibbotson Associates. Used with permission. All rights reserved. This chart illustrates the historical yield of the long-term U.S. Treasury Bond from 1926-2001. Yields represent that of an annually renewed one-bond portfolio with a remaining maturity of approximately 20 years. This chart is for illustrative purposes only y and should not be construed to represent the yields of any Prudential or Strategic Partners mutual fund.
II-4
PART C
OTHER INFORMATION
Item 23. Exhibits.
(a) (1) Agreement and Declaration of Trust.(1)
(2) Certificate of Trust.(1)
(3) Amendment to Certificate of Trust dated September 4, 2001.(2)
(b) By-laws.(3)
(c) In response to this item, Registrant incorporates by reference the following provisions of its Agreement and Declaration of Trust and By-Laws, filed herewith as Exhibit (a)(3) and Exhibit (b), respectively, defining the rights of Registrant's shareholders: Articles III and V of the Agreement and Declaration of Trust and Article III of the By-Laws.
(d) (1) Management Agreement between Registrant and Prudential Investments, LLC (formerly Prudential Investments Fund Management LLC) (PI) with respect to Strategic Partners Focused Growth Fund (the Focused Growth Fund).(4)
(2) Sub-Management Agreement between PI and Prudential Investments Management, Inc. (formerly The Prudential Investment Corporation) (PIM) with respect to the Focused Growth Fund.(5)
(3) Subadvisory Agreement between PIM and Jennison Associates LLC
(Jennison) with respect to the Focused Growth Fund.(4)
(4) Subadvisory Agreement between PI and Alliance Capital Management, L.P. (Alliance) with respect to the Focused Growth Fund.(4)
(5) Management Agreement between Registrant and PI with respect to Strategic Partners New Era Growth Fund (the New Era Growth Fund).(4)
(6) Subadvisory Agreement between PI and Massachusetts Financial Services Company (MFS) with respect to the New Era Growth Fund.(7)
(7) Subadvisory Agreement between PI and Jennison with respect to the New Era Growth Fund.(6)
(8) Management Agreement between Registrant and PI with respect to Strategic Partners Focused Value Fund (the Focused Value Fund).(4)
(9) Subadvisory Agreement between PI and Davis Selected Advisers LP
(Davis Advisers) with respect to the Focused Value Fund.(4)
(10) Subadvisory Agreement between PI and Salomon Brothers Asset Management Inc. (Salomon Brothers) with respect to the Focused Value Fund.(4)
(11) Management Agreement between Registrant and PI with respect to the Strategic Partners Mid-Cap Value Fund (Mid-Cap Value Fund), the Strategic Partners Market Opportunity Fund (the Market Opportunity Fund) and future series of Registrant.**
(12) Form of Subadvisory Agreement between PI and Fund Asset Management, L.P. d/b/a Mercury Advisors (Mercury) with respect to the Mid-Cap Value Fund.**
(13) Subadvisory Agreement between PI and Harris Associates L.P. (Harris) with respect to the Mid-Cap Value Fund.**
(e) (1) Distribution Agreement with Prudential Investment Management Services LLC (PIMS).(4)
(2) Form of Dealer Agreement.(3)
(f) Not applicable.
(g) (1) Custodian Contract between Registrant and State Street Bank and Trust Company (State Street).(3)
(2) Amendment dated February 22, 1999 to Custodian Contract between Registrant and State Street.(3)
(3) Amendment to Custodian Contract dated July 17, 2001.(8)
(h) Transfer Agency and Service Agreement between Registrant and Prudential Mutual Fund Services LLC.(3)
(i) Opinion of counsel.**
(j) Consent of independent accountants.**
(k) Not applicable.
(l) Not applicable.
(m) (1) Distribution and Service Plan for Class A shares of Registrant dated February 26, 2002.**
(2) Distribution and Service Plan for Class B shares of Registrant dated February 26, 2002.**
(3) Distribution and Service Plan for Class C shares of Registrant dated February 26, 2002.**
(n) Amended and Restated Rule 18f-3 Plan dated April 22, 2002.**
(p) (1) Registrant Code of Ethics, dated September 19, 2001.(2)
(2) PI, PIM and PIMS Code of Ethics, dated September 19, 2001.(9)
(3) Alliance Code of Ethics dated January 2001.**
(4) Jennison Code of Ethics.(3)
(5) MFS Code of Ethics.(6)
(6) Davis Advisers Code of Ethics.(10)
(7) Salomon Brothers Code of Ethics.(10)
(8) Mercury Code of Ethics.(2)
(9) Harris Code of Ethics.(2)
Powers of attorney.(2)
** Filed herewith.
(1) Incorporated by reference to Registrant's registration statement on Form N-1A filed on February 1, 2000 (File No. 333-95849).
(2) Incorporated by reference to post-effective amendment no. 7 to Registrant's registration statement on Form N-1A filed on February 20, 2002 (file No. 333-95849).
(3) Incorporated by reference to pre-effective amendment no. 1 to Registrant's registration statement on Form N-1A filed on March 27, 2000 (File No. 333-95849).
(4) Incorporated by reference to post-effective amendment no. 6 to Registrant's registration statement on Form N-1A filed on April 27, 2001 (File No. 333-95849).
(5) Incorporated by reference to post-effective amendment no. 1 to Registrant's registration statement on Form N-1A filed on July 21, 2000 (File No. 333-95849).
(6) Incorporated by reference to post-effective amendment no. 3 to Registrant's registration statement on Form N-1A filed on October 6, 2000 (File No. 333-95849).
(7) Incorporated by reference to post-effective amendment no. 4 to Registrant's registration statement on Form N-1A filed on November 30, 2000 (File No. 333-95849).
(8) Incorporated by reference to Exhibit (g)(3) to post-effective amendment no. 23 to the registration statement on Form N-1A of Prudential Natural Resources, Inc. filed on July 31, 2001 (File No. 33-15166).
(9) Incorporated by reference to Exhibit (p)(2) to post-effective amendment no. 7 to the registration statement on Form N-1A of Strategic Partners Style Specific Funds filed on October 1, 2001 (File No. 333-82621).
(10) Incorporated by reference to post-effective amendment no. 5 to Registrant's registration statement on Form N-1A filed on December 15, 2000 (File No. 333-95849).
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
Item 25. Indemnification.
As permitted by Sections 17(h) and (i) of the Investment Company Act of
1940, as amended (the 1940 Act), and pursuant to Del. Code Ann. title 12 sec.
3817, a Delaware business trust may provide in its governing instrument for the
indemnification of its officers and trustees from and against any and all
claims and demands whatsoever. Article VII, Section 2 of the Agreement and
Declaration of Trust (Exhibit a(1) to this registration statement) states that
(1) Registrant shall indemnify any present trustee or officer to the fullest
extent permitted by law against liability, and all expenses reasonably incurred
by him or her in connection with any claim, action, suit or proceeding in which
he or she is involved by virtue of his or her service as a trustee, officer or
both, and against any amount incurred in settlement thereof and (2) all persons
extending credit to, contracting with or having any claim against Registrant
shall look only to the assets of the appropriate Series (or if no Series has
yet been established, only to the assets of Registrant). Indemnification will
not be provided to a person adjudged by a court or other adjudicatory body to
be liable to Registrant or its shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of his or her duties
(collectively "disabling conduct"). In the event of a settlement, no
indemnification may be provided unless there has been a determination, as
specified in the Agreement and Declaration of Trust, that the officer or
trustee did not engage in disabling conduct. In addition, Article XI of
Registrant's By-Laws (Exhibit b to this registration statement) provides that
any trustee, officer, employee or other agent of Registrant shall be
indemnified by Registrant against all liabilities and expenses subject to
certain limitations and exceptions contained in Article XI of the By-Laws. As
permitted by Section 17(i) of the 1940 Act, pursuant to Section 10 of the
Distribution Agreement (Exhibit e to this registration statement), the
Distributor of Registrant may be indemnified against liabilities which it may
incur, except liabilities arising from bad faith, gross negligence, willful
misfeasance or reckless disregard of duties.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the Securities Act), may be permitted to Trustees, officers and controlling persons of Registrant pursuant to the foregoing provisions or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission (the SEC) such indemnification is against public policy as expressed in the 1940 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a Trustee, officer, or controlling person of Registrant in connection with the successful defense of any action, suit or proceeding) is asserted against Registrant by such Trustee, officer or controlling person in connection with the shares being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1940 Act and will be governed by the final adjudication of such issue.
Registrant will purchase an insurance policy insuring its officers and Trustees against liabilities, and certain costs of defending claims against such officers and Trustees, to the extent such officers and Trustees are not found to have committed conduct constituting willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties. The insurance policy also insures Registrant against the cost of indemnification payments to officers and Trustees under certain circumstances.
Section 8 of each Management Agreement (Exhibits d(1), (d)(5), (d)(8) and d(11) to this registration statement), Section 4 of the Sub-Management Agreement (Exhibit d(2) to this registration statement) and Section 4 of each Subadvisory Agreement (Exhibits d(3), d(4), d(6), d(7), d(9), d(10), d(12) and d(13) to this registration statement) limit the liability of PI, PIM, Jennison, Alliance, MFS, Davis Advisers, Salomon Brothers, Mercury and Harris, respectively, to liabilities arising from willful misfeasance, bad faith or gross negligence in the performance of their respective duties or from reckless disregard by them of their respective obligations and duties under the agreements.
Registrant hereby undertakes that it will apply the indemnification provisions of its By-Laws and the Distribution Agreement in a manner consistent with Release No. 11330 of the SEC under the 1940 Act so long as the interpretation of Section 17(h) and 17(i) of such Act remain in effect and are consistently applied.
Under Section 17(h) of the 1940 Act, it is the position of the staff of the SEC that if there is neither a court determination on the merits that the defendant is not liable nor a court determination that the defendant was not guilty of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of one's office, no indemnification will be permitted unless an independent legal counsel (not including a counsel who does work for either Registrant, its investment adviser, its principal underwriter or persons affiliated with these persons) determines, based upon a review of the facts, that the person in question was not guilty of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
Under its Agreement and Declaration of Trust, Registrant may advance funds
to provide for indemnification. Pursuant to the SEC staff's position on Section
17(h), advances will be limited in the following respect:
(1)Any advances must be limited to amounts used, or to be used, for the preparation and/or presentation of a defense to the action (including cost connected with preparation of a settlement);
(2)Any advances must be accompanied by a written promise by, or on behalf of, the recipient to repay that amount of the advance which exceeds the amount to which it is ultimately determined that he is entitled to receive from Registrant by reason of indemnification;
(3)Such promise must be secured by a surety bond or other suitable insurance; and
(4)Such surety bond or other insurance must be paid for by the recipient of such advance.
Item 26. Business and Other Connections of Investment Adviser.
(a) PI
See "How the [Trust/Fund] is Managed--Manager" in each prospectus constituting Part A of this registration statement and "Investment Advisory and Other Services" in each statement of additional information (SAI) constituting Part B of this registration statement.
The business and other connections of the officers of PI are listed in Schedules A and D of Form ADV of PI as currently on file with the SEC, the text of which is hereby incorporated by reference (File No. 801-31104).
The business and other connections of PI's directors and principal executive officers are set forth below. Except as otherwise indicated, the address of each person is Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102-4077.
Name and Address Position with PI Principal Occupations
---------------- ---------------- ---------------------
David R. Odenath, Jr. Officer in Charge, Officer in Charge, President, Chief Executive Officer and Chief
President, Chief Executive Operating Officer, PI; Senior Vice President, Prudential Financial,
Officer and Chief Inc. (Prudential)
Operating Officer
Catherine Brauer Executive Vice President Executive Vice President, PI
John L. Carter Executive Vice President Executive Vice President, PI
Robert F. Gunia Executive Vice President Executive Vice President and Chief Administrative Officer, PI; Vice
and Chief Administrative President, Prudential; President, PIMS
Officer
William V. Healey Executive Vice President, Executive Vice President, Chief Legal Officer and Secretary, PI; Vice
Chief Legal Officer and President and Associate General Counsel, Prudential; Senior Vice
Secretary President, Chief Legal Officer and Secretary, PIMS
Marc S. Levine Executive Vice President Executive Vice President, PI
Judy A. Rice Executive Vice President Executive Vice President, PI
Ajay Sawhney Executive Vice President Executive Vice President, PI
Lynn M. Waldvogel Executive Vice President Executive Vice President, PI
|
(b) PIM
See "How the Fund is Managed--Investment Adviser" in the prospectus of the Market Opportunity Fund, and "How the Trust is Managed--Sub-Manager" in the prospectus of the Focused Growth, New Era Growth and Focused Value Funds, included as part of Part A of this registration statement and "Investment Advisory and Other Services" in the SAIs for these Funds included as part of Part B of this registration statement.
The business and other connections of PIM's directors and executive officers are as set forth below. Except as otherwise indicated, the address of each person is Prudential Plaza, Newark, NJ 07102.
Name and Address Position with PIM Principal Occupations
---------------- ----------------- ---------------------
John R. Strangfeld, Jr. Chairman of the Board, Chief Executive Officer, Prudential Securities Incorporated; President
President, Chief Executive of Prudential Global Asset Management Group of Prudential;
Officer and Director Senior Vice President, Prudential; Chairman of the Board,
President, Chief Executive Officer and Director, PIM
Bernard W. Winograd Senior Vice President and Chief Executive Officer, Prudential Real Estate Investors; Senior Vice
Director President and Director, PIM
|
(c) Jennison
See "How the Trust is Managed--Investment Advisers" in the prospectus of the Focused Growth, New Era Growth and Focused Value Funds, included as part of Part A of this registration statement and "Investment Advisory and Other Services" in the SAI of these Funds, included as part of Part B of this registration statement.
The business and other connections of Jennison's directors and executive officers are listed in its Form ADV as currently on file with the SEC (File No. 801-5608), the relevant text of which is hereby incorporated by reference.
(d) MFS
See "How the Trust is Managed--Investment Advisers" in the prospectus of the Focused Growth, New Era Growth and Focused Value Funds, included as part of Part A of this registration statement and "Investment Advisory and Other Services" in the SAI of these Funds, included as part of Part B of this registration statement.
The business and other connections of the directors and executive officers of MFS are listed in its Form ADV as currently on file with the SEC (File No. 801-17352), the relevant text of which is hereby incorporated by reference.
(e) Alliance
See "How the Trust is Managed--Investment Advisers" in the prospectus of the Focused Growth, New Era Growth and Funds, included as part of Part A of this registration statement, and "Investment Advisory and Other Services" in the SAI of these Funds, included as part of Part B of this registration statement.
The business and other connections of the directors and executive officers of Alliance Capital Management Corporation, the general partner of Alliance, are listed in its Form ADV as currently on file with the SEC (File No. 801-32361), the relevant text of which is hereby incorporated by reference.
(f) Davis Advisers
See "How the Trust is Managed--Investment Advisers" in the prospectus of the Focused Growth, New Era Growth and Focused Value Funds, included as part of Part A of this registration statement, and "Investment Advisory and Other Services" in the SAI of these Funds, included as part of Part B of this registration statement.
The business and other connections of the directors and executive officers of Davis Advisers are listed in its Form ADV as currently on file with the SEC (File No. 801-31648), the relevant text of which is hereby incorporated by reference.
(g) Salomon Brothers
See "How the Trust is Managed--Investment Advisers" in the prospectus of the Focused Growth, New Era Growth and Focused Value Funds, included as part of Part A of this registration statement, and "Investment Advisory and Other Services" in the SAI of the Focused Value Fund, included as part of Part B of this registration statement.
The business and other connections of the directors and executive officers of Salomon Brothers are listed in its Form ADV as currently on file with the SEC (File No. 801-32046), the relevant text of which is hereby incorporated by reference.
(h) Mercury
See "How the Fund is Managed--Investment Advisers" in the prospectus of the Mid-Cap Value Fund, included as part of Part A of this registration statement, and "Investment Advisory and Other Services" in the SAI of this Fund, included as part of Part B of this registration statement.
The business and other connections of the directors and executive officers of Fund Asset Management, L.P. are listed in its Form ADV as currently on file with the SEC (File No. 801-12485), the relevant text of which is hereby incorporated by reference.
(i) Harris
See "How the Trust is Managed--Investment Advisers" in the prospectus of the Mid-Cap Value Fund, included as part of Part A of this registration statement, and "Investment Advisory and Other Services" in the SAI of this Fund, included as part of Part B of this registration statement.
The business and other connections of the directors and executive officers of Harris are listed in its Form ADV as currently on file with the SEC (File No. 801-50333), the relevant text of which is hereby incorporated by reference.
Item 27. Principal Underwriters.
(a) PIMS
PIMS is distributor for Cash Accumulation Trust, COMMAND Government Fund, COMMAND Money Fund, COMMAND Tax-Free Fund, Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund), Prudential California Municipal Fund, Prudential Equity Fund, Inc., Prudential Europe Growth Fund, Inc., Prudential's Gibraltar Fund, Inc., Prudential Global Total Return Fund, Inc., Prudential Government Income Fund, Inc., Prudential Government Securities Trust, Prudential High Yield Fund, Inc., Prudential Index Series Fund, Prudential Institutional Liquidity Portfolio, Inc., Prudential MoneyMart Assets, Inc., Prudential Municipal Bond Fund, Prudential Municipal Series Fund, Prudential National Municipals Fund, Inc., Prudential Natural Resources Fund, Inc., Prudential Pacific Growth Fund, Inc., Prudential Real Estate Securities Fund, Prudential Sector Funds, Inc., Prudential Small Company Fund, Inc., Prudential Tax-Free Money Fund, Inc., Prudential Tax-Managed Funds, Prudential Tax-Managed Small-Cap Fund, Inc., Prudential Total Return Bond Fund, Inc., Prudential U.S. Emerging Growth Fund, Inc., Prudential Value Fund, Prudential World Fund, Inc., Prudential 20/20 Focus Fund, Special Money Market Fund, Inc., Strategic Partners Asset Allocation Funds, Strategic Partners Style Specific Funds, Strategic Partners Opportunity Funds, The Prudential Investment Portfolios, Inc. and The Target Portfolio Trust.
PIMS is also distributor of the following unit investment trusts: Separate Accounts: The Prudential Variable Contract Account -2, The Prudential Variable Contract Account -10, The Prudential Variable Contract Account -11, The Prudential Variable Contract Account -24, The Prudential Variable Contract Account GI -2, The Prudential Discovery Select Group Variable Contract Account, The Pruco Life Flexible Premium Variable Annuity Account, The Pruco Life of New Jersey Flexible Premium Variable Annuity Account, The Prudential Individual Variable Contract Account and The Prudential Qualified Individual Variable Contract Account.
(b) Information concerning the directors and officers of PIMS is set forth below.
Positions and Offices Positions and Offices
Name(1) with Underwriter with Registrant
------- ---------------- ---------------
Stuart A. Abrams............... Senior Vice President and None
Compliance
Officer
213 Washington Street Newark,
NJ 07102
Margaret Deverell.............. Vice President and Chief None
Financial Officer
213 Washington Street Newark,
NJ 07102
Robert F. Gunia................ President Vice President and Trustee
William V. Healey.............. Senior Vice President, Assistant Secretary
Secretary and Chief Legal
Officer
Bernard W. Winograd............ Executive Vice President None
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(c) Registrant has no principal underwriter who is not an affiliated person of Registrant.
Item 28. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the Rules thereunder are maintained at the offices of State Street, One Heritage Drive, North Quincy, Massachusetts 02171; PIM, Prudential Plaza, 745 Broad Street, Newark, New Jersey 07102; Registrant, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077; Jennison, 466 Lexington Avenue, New York, New York 10017; Alliance, 1345 Avenue of the Americas, New York, New York, 10105 and 601 Second Avenue South, Suite 5000, Minneapolis, Minnesota 55402; MFS, 500 Boylston Street, Boston, Massachusetts 02116; Davis Advisers, 2949 East Elvira Road, Suite 101, Tucson, Arizona 85706; Salomon Brothers, 750 Washington Boulevard, 11th Floor, Stamford, Connecticut 06901; PMFS, 194 Wood Avenue South, Iselin, New Jersey 08830, Mercury, 800 Scudders Mill Road, Plainsboro, New Jersey 08536; and Harris, Two North LaSalle Street, Chicago, Illinois 60602-3790. Documents required by Rules 31a-1(b)(5), (6), (7), (9), (10) and (11) and 31a-1(f) and Rules 31a-1(b)(4) and (11) and 31a-1(d) under the 1940 Act will be kept at Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, and the remaining accounts, books and other documents required by such other pertinent provisions of Section 31(a) of the 1940 Act and the Rules promulgated thereunder will be kept by State Street and PMFS.
Item 29. Management Services.
Other than as set forth under the captions "How the [Trust/Fund] is Managed--Manager;--Sub-Manager;--Investment Advisers; and --Distributor" in the prospectuses and the caption "Investment Advisory and Other Services" in the SAIs, constituting Parts A and B, respectively, of this registration statement, Registrant is not a party to any management-related service contract.
Item 30. Undertakings.
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company Act, Registrant certifies that it meets all of the requirements for effectiveness of this registration statement under Rule 485(b) under the Securities Act and has duly caused this post-effective amendment to its registration statement to be signed on its behalf by the undersigned, duly authorized, in the City of Newark, and State of New Jersey, on the 24th day of April, 2002.
STRATEGIC PARTNERS OPPORTUNITY FUNDS
By /S/ DAVID R. ODENATH, JR. ------------------------------------ David R. Odenath, Jr., President |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Trustee April 24, 2002
-----------------------
Eugene C. Dorsey
* Trustee April 24, 2002
-----------------------
Saul K. Fenster
* Trustee April 24, 2002
-----------------------
Robert F. Gunia
* Trustee April 24, 2002
-----------------------
Robert E. La Blanc
* Trustee April 24, 2002
-----------------------
Douglas H. McCorkindale
* Trustee April 24, 2002
-----------------------
W. Scott McDonald, Jr.
* Trustee April 24, 2002
-----------------------
Thomas T. Mooney
* Trustee and President April 24, 2002
-----------------------
David R. Odenath, Jr.
* Trustee April 24, 2002
-----------------------
Stephen Stoneburn
* Trustee April 24, 2002
-----------------------
Clay T. Whitehead
* Treasurer and Principal Financial April 24, 2002
-----------------------
Grace C. Torres and Accounting Officer
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*By /S/ GEORGE P. ATTISANO ---------------------------------- George P. Attisano Attorney-in-fact |
STRATEGIC PARTNERS OPPORTUNITY FUNDS
EXHIBIT INDEX
Exhibit
Number Description
--------- -----------
(d) (11) Management Agreement between Registrant and PI with respect to the Mid-Cap Value and Market Opportunity Funds
and future series of Registrant.
(12) Form of Subadvisory Agreement between PI and Mercury with respect to the Mid-Cap Value Fund.
(13) Subadvisory Agreement between PI and Harris with respect to the Mid-Cap Value Fund.
(i) Opinion of counsel.
(j) Consent of independent accountants.
(m) (1) Distribution and Service Plan for Class A Shares of Registrant dated February 26, 2002.
(2) Distribution and Service Plan for Class B Shares of Registrant dated February 26, 2002.
(3) Distribution and Service Plan for Class C Shares of Registrant dated February 26, 2002.
(n) Amend and Restated Rule 18f-3 Plan dated April 23, 2002.
(p) (3) Alliance Code of Ethics dated January 2001.
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Exhibit (d)(11)
STRATEGIC PARTNERS OPPORTUNITY FUNDS
Agreement made this 26th day of February, 2002, between Strategic
Partners Opportunity Funds (formerly, Strategic Partners Series), a Delaware
business trust (the "Trust"), on behalf of each series listed on Schedule A
attached hereto, as amended from time to time (each such series, a "Fund"), and
Prudential Investments LLC (formerly Prudential Investments Fund Management
LLC), a New York limited liability company (the "Manager").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified open-end, management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Manager to render or contract to obtain as hereinafter provided investment advisory services to the Fund and the Trust also desires to avail itself of the facilities available to the Manager with respect to the administration of the day-to-day business affairs of the Fund, and the Manager is willing to render such investment advisory and administrative services;
NOW, THEREFORE, the parties agree as follows:
1. The Trust hereby appoints the Manager to act as manager of the Fund, and as administrator of the business affairs of the Fund for the period and on the terms set forth in this Agreement. The Manager accepts such appointment and agrees to render the services herein described, for the compensation herein provided. Subject to the approval of the Board of Trustees of the Trust, the Manager is authorized to enter into a subadvisory agreement with Prudential Investment Management Inc. (formerly The Prudential Investment Corporation), Jennison Associates LLC, or any other subadviser, whether or not affiliated with the Manager (each, a Subadviser), pursuant to which such Subadviser shall furnish to the Fund the investment advisory services in connection with the management of the Fund (each, a "Subadvisory Agreement"). Subject to the approval of the Board of Trustees of the Trust, the Manager is authorized to retain more than one Subadviser for the Fund, and if the Fund has more than one Subadviser, the Manager is authorized to allocate the Fund's assets among the Subadvisers. The Manager will continue to have responsibility for all investment advisory services furnished pursuant to any Subadvisory Agreement. The Trust and the Manager understand and agree that the Manager may manage the Fund in a "manager-of-managers" style with either a single or multiple Subadvisers, which contemplates that the Manager will, among other things and pursuant to an order issued by the Securities and Exchange Commission ("SEC"): (i) continually evaluate the performance of the Subadviser to the Fund through quantitative and qualitative analysis and consultations with such Subadviser; (ii) periodically make recommendations to the Trust's Board as to whether the contract with one or more Subadvisers should be renewed, modified, or terminated; and (iii) periodically report to the Trust's Board regarding the results of its evaluation and monitoring functions. The Trust recognizes that subject to the approval of the
Board of Trustees of the Trust, a Subadviser's services may be terminated or modified pursuant to the "manager-of-managers" process and that the Manager may appoint a new Subadviser for a Subadviser that is so removed.
2. Subject to the supervision of the Board of Trustees of the Trust, the
Manager shall administer the Fund's business affairs and, in connection
therewith, shall furnish the Fund with office facilities and with clerical,
bookkeeping and recordkeeping services at such office facilities and, subject to
Section 1 hereof and any Subadvisory Agreement, the Manager shall manage the
investment operations of the Fund and the composition of the Fund's portfolio
including the purchase, retention and disposition thereof, in accordance with
the Fund's investment objectives, policies and restrictions as stated in the
Fund's SEC registration statement, and subject to the following understandings:
(a) The Manager (or a Subadviser under the Manager's supervision) shall provide supervision of the Fund's investments, and shall determine from time to time what investments or securities will be purchased, retained, sold or loaned by the Fund, and what portion of the assets will be invested or held uninvested as cash.
(b) The Manager, in the performance of its duties and obligations under this Agreement, shall act in conformity with the Agreement and Declaration of Trust and By-Laws of the Trust and the Trust's SEC registration statement and with the instructions and directions of the Board of Trustees of the Trust, and will conform to and comply with the requirements of the 1940 Act and all other applicable federal and state laws and regulations. In connection therewith, the Manager shall, among other things, prepare and file (or cause to be prepared and filed) such reports as are, or may in the future be, required by the SEC.
(c) The Manager (or the Subadviser under the Manager's supervision) shall determine the securities and futures contracts to be purchased or sold by the Fund and will place orders pursuant to its determinations with or through such persons, brokers, dealers or futures commission merchants (including but not limited to Prudential Securities Incorporated) in conformity with the policy with respect to brokerage as set forth in the Trust's Registration Statement or as the Board of Trustees may direct from time to time. In providing the Fund with investment supervision, it is recognized that the Manager (or the Subadviser under the Manager's supervision) will give primary consideration to securing the most favorable price and efficient execution. Consistent with this policy, the Manager (or Subadviser under the Manager's supervision) may consider the financial responsibility, research and investment information and other services provided by brokers, dealers or futures commission merchants who may effect or be a party to any such transaction or other transactions to which other clients of the Manager (or Subadviser) may be a party. It is understood that Prudential Securities Incorporated (or a broker-dealer affiliated with a Subadviser) may be used as principal broker for securities transactions, but that no formula has been adopted for allocation of the Fund's investment transaction business. It is also understood that it is desirable for the Fund that the Manager (or Subadviser) have access to supplemental investment and market research and security and economic analysis provided by brokers or futures
commission merchants, and that such brokers or futures commission merchants may execute brokerage transactions at a higher cost to the Fund than may result when allocating brokerage to other brokers or futures commission merchants on the basis of seeking the most favorable price and efficient execution. Therefore, the Manager (or the Subadviser under the Manager's supervision) is authorized to pay higher brokerage commissions for the purchase and sale of securities and futures contracts for the Fund to brokers or futures commission merchants who provide such research and analysis, subject to review by the Trust's Board of Trustees from time to time with respect to the extent and continuation of this practice. It is understood that the services provided by such broker or futures commission merchant may be useful to the Manager (or the Subadviser) in connection with its services to other clients.
On occasions when the Manager (or a Subadviser under the Manager's supervision) deems the purchase or sale of a security or a futures contract to be in the best interest of the Fund as well as other clients of the Manager (or the Subadviser), the Manager (or Subadviser), to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities or futures contracts to be so sold or purchased in order to obtain the most favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the securities or futures contracts so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Manager (or the Subadviser) in the manner it considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to such other clients.
(d) The Manager (or the Subadviser under the Manager's supervision) shall maintain all books and records with respect to the Fund's portfolio transactions and shall render to the Trust's Board of Trustees such periodic and special reports as the Board may reasonably request.
(e) The Manager (or the Subadviser under the Manager's supervision) shall be responsible for the financial and accounting records to be maintained by the Fund (including those being maintained by the Fund's Custodian).
(f) The Manager (or the Subadviser under the Manager's supervision) shall provide the Fund's Custodian on each business day information relating to all transactions concerning the Fund's assets.
(g) The investment management services of the Manager to the Fund under this Agreement are not to be deemed exclusive, and the Manager shall be free to render similar services to others.
(h) The Manager shall make reasonably available its employees and officers for consultation with any of the Trustees or officers or employees of the Trust with respect to any matter discussed herein, including, without limitation, the valuation of the Fund's securities.
3. The Fund has delivered to the Manager copies of each of the following documents and will deliver to it all future amendments and supplements, if any:
(a) Agreement and Declaration of Trust;
(b) By-Laws of the Trust (such By-Laws, as in effect on the date hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of Trustees of the Trust authorizing the appointment of the Manager and approving the form of this agreement;
(d) Registration Statement under the 1940 Act and the Securities Act of 1933, as amended, on Form N-1A (the Registration Statement), as filed with the SEC relating to the Fund and its shares of beneficial interest and all amendments thereto; and
(e) Prospectus and Statement of Additional Information of the Fund.
4. The Manager shall authorize and permit any of its officers and employees who may be elected as Trustees or officers of the Trust to serve in the capacities in which they are elected. All services to be furnished by the Manager under this Agreement may be furnished through the medium of any such officers or employees of the Manager.
5. The Manager shall keep the Fund's books and records required to be maintained by it pursuant to Paragraph 2 hereof. The Manager agrees that all records which it maintains for the Fund are the property of the Fund, and it will surrender promptly to the Fund any such records upon the Fund's request, provided however that the Manager may retain a copy of such records. The Manager further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any such records as are required to be maintained by the Manager pursuant to Paragraph 2 hereof.
6. During the term of this Agreement, the Manager shall pay the following expenses:
(i) the salaries and expenses of all employees of the Trust and the Manager, except the fees and expenses of Trustees who are not affiliated persons of the Manager or any Subadviser,
(ii) all expenses incurred by the Manager in connection with managing the ordinary course of the Fund's business, other than those assumed by the Fund herein, and
(iii) the fees, costs and expenses payable to a Subadviser pursuant to a Subadvisory Agreement. The Trust assumes and will pay the expenses described below:
(a) the fees and expenses incurred by the Trust in connection with the management of the investment and reinvestment of the Fund's assets,
(b) the fees and expenses of Trust Trustees who are not "interested persons" of the Trust within the meaning of the 1940 Act,
(c) the fees and expenses of the Custodian that relate to (i) the custodial function and the recordkeeping connected therewith, (ii) preparing and maintaining the general accounting records of the Fund and the provision of any such records to the Manager useful to the Manager in connection with the Manager's responsibility for the accounting records of the Fund pursuant to Section 31 of the 1940 Act and the rules promulgated thereunder, (iii) the pricing or valuation of the shares of the Fund, including the cost of any pricing or valuation service or services which may be retained pursuant to the authorization of the Board of Trustees of the Trust, and (iv) for both mail and wire orders, the cashiering function in connection with the issuance and redemption of the Fund's securities,
(d) the fees and expenses of the Trust's Transfer and Dividend Disbursing Agent that relate to the maintenance of each shareholder account,
(e) the charges and expenses of legal counsel and independent accountants for the Trust,
(f) brokers' commissions and any issue or transfer taxes chargeable to the Fund in connection with its securities and futures transactions,
(g) all taxes and corporate fees payable by the Fund to
federal, state or other governmental agencies,
(h) the fees of any trade associations of which the Fund may be a member,
(i) the cost of share certificates representing, and/or non-negotiable share deposit receipts evidencing, shares of the Fund,
(j) the cost of fidelity, directors' and officers' and errors and omissions insurance,
(k) the fees and expenses involved in registering and maintaining registration of the Trust and of shares of the Fund with the Securities and Exchange Commission, and paying notice filing fees under state securities laws, including the preparation and printing of the Trust's registration statement and the Fund's prospectus and statements of additional information for filing under federal and state securities laws for such purposes,
(l) allocable communications expenses with respect to investor services and all expenses of shareholders' and Trustees' meetings and of preparing, printing and mailing reports and notices to shareholders in the amount necessary for distribution to the shareholders,
(m) litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Fund's business, and
(n) any expenses assumed by the Fund pursuant to a
Distribution and Service Plan adopted in a manner that is consistent with Rule 12b-1 under the 1940 Act.
7. For the services provided and the expenses assumed pursuant to this Agreement, the Trust will pay to the Manager as full compensation therefor a fee at the annual rate(s) as described on the attached Schedule A with respect to the average daily net assets of the Fund. This fee will be computed daily, and will be paid to the Manager monthly.
8. The Manager shall not be liable for any error of judgment or for any loss suffered by the Fund in connection with the matters to which this Agreement relates, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services (in which case any award of damages shall be limited to the period and the amount set forth in Section 36(b)(3) of the 1940 Act) or loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement.
9. This Agreement shall continue in effect for a period of more than two years from the date hereof only so long as such continuance is specifically approved at least annually in conformity with the requirements of the 1940 Act; provided, however, that this Agreement may be terminated with respect to the Fund by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities (as defined in the 1940Act) of the Fund, or by the Manager at any time, without the payment of any penalty, on not more than 60 days' nor less than 30 days' written notice to the other party. This Agreement shall terminate automatically in the event of its assignment (as defined in the 1940 Act).
10. Nothing in this Agreement shall limit or restrict the right of any officer or employee of the Manager who may also be a Trustee, officer or employee of the Trust to engage in any other business or to devote his or her time and attention in part to the management or other aspects of any business, whether of a similar or dissimilar nature, nor limit or restrict the right of the Manager to engage in any other business or to render services of any kind to any other corporation, firm, individual or association.
11. Except as otherwise provided herein or authorized by the Board of Trustees of the Trust from time to time, the Manager shall for all purposes herein be deemed to be an independent contractor, and shall have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund.
12. During the term of this Agreement, the Trust agrees to furnish the Manager at its principal office all prospectuses, proxy statements, reports to shareholders, sales literature, or other material prepared for distribution to shareholders of the Fund or the public, which refer in any way to the Manager, prior to use thereof and not to use such material if the Manager reasonably objects in writing within five business days (or such other time as may be mutually agreed) after receipt thereof. In the event of termination of this Agreement, the Trust will continue to furnish to the Manager copies of any of the above- mentioned materials that refer in any way to the Manager. Sales literature may be furnished to the Manager hereunder by first-
class or overnight mail, facsimile transmission equipment or hand delivery. The Trust shall furnish or otherwise make available to the Manager such other information relating to the business affairs of the Fund as the Manager at any time, or from time to time, reasonably requests in order to discharge its obligations hereunder.
13. This Agreement may be amended by mutual consent, but the consent of the Trust must be obtained in conformity with the requirements of the 1940 Act. By mutual consent with the Manager, the Trust may add further series to Schedule A from time to time, subject to Board and shareholder approval.
14. Any notice or other communication required to be given pursuant to this Agreement shall be deemed duly given if delivered or mailed by registered mail, postage prepaid, (1) to the Manager at Gateway Center Three, 100 Mulberry Street, 4th Floor, Newark, NJ 07102-4077, Attention: Secretary; or (2) to the Trust at Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102-4077, Attention: President.
15. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
16. The Fund may use any name including the word "Prudential" only for so long as this Agreement or any extension, renewal or amendment hereof remains in effect, including any similar agreement with any organization which shall have succeeded to the Manager's business as Manager or any extension, renewal or amendment thereof remain in effect. At such time as such an agreement shall no longer be in effect, the Fund will (to the extent that it lawfully can) cease to use such a name or any other name indicating that it is advised by, managed by or otherwise connected with the Manager, or any organization which shall have so succeeded to such businesses. In no event shall the Fund use any name including the word "Prudential" if the Manager's function is transferred or assigned to a company of which Prudential Financial, Inc. does not have control.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
STRATEGIC PARTNERS OPPORTUNITY FUNDS
By: /s/ David R. Odenath
--------------------
David R. Odenath
President
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PRUDENTIAL INVESTMENTS LLC
By: /s/ Robert F. Gunia
-------------------
Robert F. Gunia
Executive Vice President
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SCHEDULE A
Funds Covered by the Management Agreement between Strategic Partners Opportunity Funds and Prudential Investments LLC dated February 26, 2002
-----------------------------------------------------------------------------------------------------------------------
Date Added to Management
Fund Management Fee* Agreement
------------------------------------------------------- ------------------------------ --------------------------------
Strategic Partners Market Opportunity Fund 0.90% to $1 billion and February 26, 2002
0.85% above $1 billion
------------------------------------------------------- ------------------------------ --------------------------------
Strategic Partners Mid-Cap Value Fund 0.90% to $1 billion and February 26, 2002
0.85% above $1 billion
------------------------------------------------------- ------------------------------ --------------------------------
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* Annual fee, based on a percentage of a Fund's average daily net assets.
EXHIBIT (D)(12)
FORM OF SUBADVISORY AGREEMENT WITH
MERCURY ADVISORS
Strategic Partners Opportunity Funds
(formerly, Strategic Partners Series)
Strategic Partners Mid-Cap Value Fund
Agreement made as of this 22nd day of April, 2002, between Prudential Investments LLC, a New York limited liability company ("PI" or the "Manager"), and Fund Asset Management, L.P., doing business as Mercury Advisors (the "Subadviser"), a Delaware limited partnership.
WHEREAS, the Manager has entered into a Management Agreement, dated February 26, 2002 (the "Management Agreement"), with Strategic Partners Opportunity Funds, a Delaware business trust (the "Trust"), on behalf of the Strategic Partners Mid-Cap Value Fund (the "Fund"), a series of a non-diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), pursuant to which PI acts as Manager of the Fund; and
WHEREAS, PI desires to retain the Subadviser to provide investment advisory services to the Fund and to manage such portion of the assets and investment operations of the Fund as the Manager shall from time to time direct (the "Segment"), and the Subadviser is willing to render such investment advisory services.
NOW, THEREFORE, the parties hereby agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of Trustees of the Trust, the Subadviser shall manage the Segment and shall manage the composition of the Segment's portfolio, including the purchase, retention and disposition thereof, in accordance with the Fund's investment objectives, policies and restrictions as stated in its prospectus and statement of additional information (such prospectus and statement of additional information as currently in effect and as amended or supplemented from time to time, being herein called the "Prospectus"), and subject to the following understandings:
(i) The Subadviser shall provide supervision of the Segment's
investments and shall determine from time to time what
investments and securities will be purchased, retained, sold
or loaned by the Segment, and what portion of the assets
thereof will be invested or held uninvested as cash. At the
inception of the Fund's operations, the Manager shall allocate
approximately 50% of the Fund's assets to the Segment.
Thereafter, under normal market conditions, in order to
maintain the allocation of approximately 50% of the Fund's
assets to the Segment, the Manager shall (1) allocate
approximately 50% of all of the Fund's daily cash inflows
(that is, purchases and reinvested distributions) and outflows
(that is, redemptions and expense items) to the Segment; (2)
periodically adjust the allocation of the Fund's daily cash
inflows and outflows between the Segment and
the remainder of the Fund's assets; or (3) otherwise rebalance the Fund's assets. The Manager will base the timing of any reallocations on the best interests of the Fund and its shareholders.
(ii) In the performance of its duties and obligations under this Agreement, the Subadviser shall act in conformity with the Agreement and Declaration of Trust and By-Laws of the Trust, with the Prospectus and with the instructions and directions of the Manager and of the Board of Trustees of the Trust, as delivered by the Manager to the Subadviser, and will conform to and comply with the requirements of the 1940 Act, the Internal Revenue Code of 1986, as amended, and all other applicable federal and state laws and regulations.
(iii) The Subadviser shall determine the assets to be purchased or sold by the Segment as provided herein and will place orders with or through such persons, brokers or dealers to carry out the policy with respect to brokerage set forth in the Trust's registration statement or as the Board of Trustees or the Manager may direct from time to time, in conformity with federal securities laws and to the extent consistent with best execution principles as established by the Securities and Exchange Commission ("SEC"). In executing Fund transactions and selecting brokers or dealers, the Subadviser will use its best efforts to seek on behalf of the Fund the best overall terms available. In assessing the best overall terms available for any transaction, the Subadviser shall consider all factors that it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any, both for the specific transaction and on a continuing basis. In evaluating the best overall terms available, and in selecting the broker-dealer to execute a particular transaction, the Subadviser may also consider the brokerage and research services provided (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934). Consistent with any guidelines established by the Board of Trustees of the Trust, the Subadviser is authorized to negotiate and pay to a broker or dealer who provides such brokerage and research services a commission for executing a transaction for the Fund which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Subadviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer viewed in terms of that particular transaction or in terms of the overall responsibilities of the Subadviser to the Fund. In addition, the Subadviser is authorized to allocate purchase and sale orders for securities to brokers or dealers (including brokers and dealers that are affiliated with the Manager, Subadviser or the Trust's principal underwriter) to take into account the sale of shares of the Fund if the Subadviser believes that the quality of the transaction and the commission are comparable to what they would be with other qualified firms. In no instance, however, will the Segment's assets be purchased from or sold to the Manager, Subadviser, the Trust's principal underwriter, or any affiliated person of either the Trust, Adviser,
the Subadviser or the principal underwriter, acting as principal in the transaction, except to the extent permitted by the SEC and the 1940 Act.
On occasions when the Subadviser deems the purchase or sale of a security or futures contract to be in the best interest of the Fund as well as other clients of the Subadviser, the Subadviser, to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities or futures contracts to be sold or purchased in order to obtain the most favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the securities or futures contracts so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Subadviser in the manner the Subadviser considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to such other clients.
(iv) The Subadviser shall maintain all books and records with respect to the Fund's portfolio transactions required by subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act, and shall render to the Trust's Board of Trustees such periodic and special reports as the Trustees may reasonably request. The Subadviser shall make reasonably available its employees and officers for consultation with any of the Trustees or officers or employees of the Fund with respect to any matter discussed herein, including, without limitation, the valuation of the Fund's securities.
(v) The Subadviser shall provide the Fund's Custodian on each business day with information relating to all transactions concerning the Segment, and shall provide the Manager with such information upon the reasonable request of the Manager.
(vi) The investment management services provided by the
Subadviser hereunder are not to be deemed exclusive, and the
Subadviser shall be free to render similar services to others.
Conversely, Subadviser and Manager understand and agree that
if the Manager manages the Fund in a "manager-of-managers"
style, the Manager will, among other things, (i) continually
evaluate the performance of the Subadviser through
quantitative and qualitative analysis and consultations with
the Subadviser; (ii) periodically make recommendations to the
Trust's Board as to whether the contract with one or more
subadvisers should be renewed, modified, or terminated; and
(iii) periodically report to the Trust's Board regarding the
results of its evaluation and monitoring functions. The
Subadviser recognizes that its services may be terminated or
modified pursuant to this process.
(b) The Subadviser shall keep the Fund's books and records required to be maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall timely furnish to the Manager all information relating to the Subadviser's services hereunder needed by the Manager to keep the other books and records of the Fund required by Rule 31a-1 under the 1940 Act. The Subadviser agrees that all records which it maintains for the Fund
are the property of the Fund, and the Subadviser will surrender within three business days to the Fund any of such records upon the Fund's reasonable request, provided, however, that the Subadviser may retain a copy of such records. The Subadviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any such records as are required to be maintained by it pursuant to paragraph 1(a) hereof.
(c) The Subadviser agrees to maintain adequate compliance procedures to ensure its compliance with the 1940 Act, the Investment Advisers Act of 1940, as amended, and other applicable state and federal regulations.
(d) The Subadviser shall furnish to the Manager copies of all records
prepared in connection with (i) the performance of this Agreement and
(ii) the maintenance of compliance procedures pursuant to paragraph
1(d) hereof as the Manager may reasonably request.
2. The Manager shall continue to have responsibility for all services to be provided to the Fund pursuant to the Management Agreement and, as more particularly discussed above, shall oversee and review the Subadviser's performance of its duties under this Agreement.
3. Each party represents and warrants to the other that it is (a) duly organized and existing and in good standing under the laws of its state of organization; (b) duly qualified to conduct its business in all jurisdictions that require such qualification; and (c) duly authorized to enter into and perform this Agreement.
4. (a) For the services provided and the expenses assumed pursuant to this Agreement, the Manager shall pay the Subadviser as full compensation therefor, a fee equal to the percentage of the Fund's average daily net assets of the portion of the Fund managed by the Subadviser as described in the attached Schedule A. This fee will be computed daily and paid monthly.
(b) Except for expenses specifically assumed or agreed to be paid by the Subadviser pursuant hereto, the Subadviser shall not be liable for any organizational, operational or business expenses of the Manager or the Trust including, without limitation, (a) interest and taxes, (b) brokerage commissions and other costs in connection with the purchase or sale of securities or other investment instruments with respect to the Fund, and (c) custodian fees and expenses. Any reimbursement of advisory fees required by any expense limitation provision of any law shall be the sole responsibility of the Manager. The Manager and the Subadviser shall not be considered as partners or participants in a joint venture. The Subadviser will pay its own expenses incurred in furnishing the services to be provided by it pursuant to this Agreement.
5. (a) The Subadviser shall not be liable for any error of judgment or for any loss suffered by the Fund or the Manager in connection with the matters to which this Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the Subadviser's part in the performance of its duties or from its reckless disregard of its obligations and duties under this Agreement.
(b) Each party to this Agreement shall indemnify and hold harmless the other party from and against any and all claims, losses, liabilities or damages (including reasonable attorney's fees and other related expenses) howsoever arising from or in connection with the performance of the indemnifying party's obligations under this Agreement; provided, however, that the indemnifying party's obligation under this Section 5 shall be reduced to the extent that the claim against, or the loss, liability or damage experienced by the indemnified party is caused by or is otherwise directly related to the indemnified party's own willful misfeasance, bad faith or gross negligence, or to the reckless disregard of its duties under this Agreement.
(c) The Manager acknowledges and agrees that the Subadviser makes no representation or warranty, expressed or implied, that any level of performance or investment result will be achieved by the Fund or the Segment or that the Fund or the Segment will perform comparably with any standard or index, including other clients of the Subadviser, whether public or private.
6. This Agreement shall continue in effect for a period of more than two years from the date hereof only so long as such continuance is specifically approved for an initial period of two years, and at least annually thereafter, in conformity with the requirements of the 1940 Act; provided, however, that this Agreement may be terminated by the Trust, on behalf of the Fund, at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, or by the Manager or the Subadviser at any time, without the payment of any penalty, on not more than 60 days' nor less than 30 days' written notice to the other party. This Agreement shall terminate automatically in the event of its assignment (as defined in the 1940 Act) or upon the termination of the Management Agreement. The Subadviser agrees that it will promptly notify the Trust and the Manager of the occurrence or anticipated occurrence of any event that would result in the assignment (as defined in the 1940 Act) of this Agreement, including, but not limited to, a change or anticipated change in control (as defined in the 1940 Act) of the Subadviser.
Any notice or other communication required to be given pursuant to
Section 5 of this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Manager at Gateway Center Three,
100 Mulberry Street, 4th Floor, Newark, NJ 07102-4077, Attention: Secretary; (2)
to the Trust at Gateway Center Three, 100 Mulberry Street, Newark, NJ
07102-4077, Attention: Secretary; or (3) to the Subadviser at 800 Scudders Mill
Road, Plainsboro, NJ 08536, Attention: Allan J. Oster, Esq.
7. Nothing in this Agreement shall limit or restrict the right of any of the Subadviser's partners, principals, members, officers or employees who may also be a Trustee, officer or employee of the Trust or the Fund to engage in any other business or to devote his or her time and attention in part to the management or other aspects of any business, whether of a similar or a dissimilar nature, nor limit or restrict the Subadviser's right to engage in any other business or to render services of any kind to any other corporation, firm, individual or association.
8. During the term of this Agreement, the Manager agrees to furnish the Subadviser at the address designated for delivery of notices in Section 6 hereto all prospectuses, proxy statements, reports to shareholders, sales literature or other material prepared for distribution to shareholders of the Fund or the public, which refer to the Subadviser or the Segment in any way, prior to use thereof and not to use material if the Subadviser reasonably objects in writing five business days (or such other time as may be mutually agreed) after receipt thereof. Sales literature may be furnished to the Subadviser hereunder by first-class or overnight mail, facsimile transmission equipment or hand delivery. Until the Manager delivers any revisions or supplements to the documents described above to the Subadviser, the Subadviser shall be fully protected in relying on the versions of such documents previously furnished by the Manager to the Subadviser.
9. Notwithstanding any provision herein to the contrary, each party hereto agrees that any Nonpublic Personal Information, as defined under Section 248.3(t) of Regulation S-P ("Regulation S-P"), promulgated under the Gramm-Leach-Bliley Act (the "Act"), disclosed by a party hereunder is for the specific purpose of permitting the other party to perform the services set forth in this Agreement. Each party agrees that, with respect to such information, it will comply with Regulation S-P and the Act and that it will not disclose any Nonpublic Personal Information received in connection with this Agreement to any other party, except to the extent as necessary to carry out the services set forth in this Agreement and consistent with such other party's privacy notice to its customers, or as otherwise permitted by Regulation S-P or the Act.
10. This Agreement may be amended by mutual consent, but the consent of the Fund must be obtained in conformity with the requirements of the 1940 Act.
11. This Agreement shall be governed by the laws of the State of New York. This Agreement together with any other written agreements between the parties entered into concurrently with this Agreement contain the entire agreement between the parties with respect to the transactions contemplated hereby and supersede all previous oral or written negotiations, commitments and understandings related thereto. No waiver by one party of any obligation of the other hereunder shall be considered a waiver of any other obligation of such party. If any portion of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
PRUDENTIAL INVESTMENTS LLC FUND ASSET MANAGEMENT, L.P.
(D/B/A MERCURY ADVISORS)
By:__________________________________ By: __________________________________
Robert F. Gunia Robert C. Doll
Executive Vice President President
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Schedule A
Subadvisory Agreement dated April 22, 2002 between PI and Fund Asset Management, L.P. (d/b/a Mercury Advisors) with respect to the Strategic Partners Mid-Cap Value Fund, a series of Strategic Partners Opportunity Funds
Compensation Schedule
With respect to the Fund, the annual fee payable to the Subadviser as a percentage of average daily net assets of the Fund managed by the Subadviser:
0.55% on the first $1 billion in Fund assets, 0.45% on Fund assets over $1 billion.
As of April 22, 2002
Exhibit(d)(13)
SUBADVISORY AGREEMENT WITH
HARRIS ASSOCIATES, L.P.
Strategic Partners Opportunity Funds
(formerly, Strategic Partners Series)
Strategic Partners Mid-Cap Value Fund
Agreement made as of this 5th day of April, 2002, between Prudential Investments LLC, a New York limited liability company ("PI" or the "Manager"), and Harris Associates, L.P. (the "Subadviser"), a Delaware limited partnership.
WHEREAS, the Manager has entered into a Management Agreement, dated February 26, 2002 (the "Management Agreement"), with Strategic Partners Opportunity Funds, a Delaware business trust (the "Trust"), on behalf of the Strategic Partners Mid-Cap Value Fund (the "Fund"), a series of a non-diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), pursuant to which PI acts as Manager of the Fund; and
WHEREAS, PI desires to retain the Subadviser to provide investment advisory services to the Fund and to manage such portion of the Fund as the Manager shall from time to time direct, and the Subadviser is willing to render such investment advisory services.
NOW, THEREFORE, the parties hereby agree as follows:
1. (a) Subject to the supervision of the Manager and the Board of Trustees of the Trust, the Subadviser shall manage such portion of the investment operations of the Fund as the Manager shall direct and shall have full discretionary authority to direct the purchase, sale, exchange or conversion of all investments in the portfolio of such portion of the Fund's investment operations, in accordance with the Fund's investment objectives, policies and restrictions as stated in its prospectus and statement of additional information (such prospectus and statement of additional information as currently in effect and as amended or supplemented from time to time, being herein called the "Prospectus"), and subject to the following understandings:
(i) The Subadviser shall provide supervision of such portion of the Fund's investments as the Manager shall direct and shall determine from time to time what investments and securities will be purchased, retained, sold or loaned by the Fund, and what portion of the assets will be invested or held uninvested as cash.
(ii) In the performance of its duties and obligations under this Agreement, the Subadviser shall act in conformity with the Agreement and Declaration of Trust and By-Laws of the Trust, with the Prospectus and with the instructions and directions of the Manager and of the Board of Trustees of the Trust, as delivered by the Manager to the Subadviser, and will conform to and comply with the requirements of the 1940 Act, the Internal Revenue Code of 1986, as amended, and all other applicable federal and state laws and regulations.
(iii) The Subadviser shall determine the securities and futures contracts to be purchased or sold by such portion of the Fund, and will place orders with or through such persons, brokers, dealers or futures commission merchants (including but not limited to Prudential Securities Incorporated or any broker or dealer affiliated with the Subadviser) to carry out the policy with respect to brokerage as set forth in the Fund's Prospectus or as the Board of Trustees may direct from time to time. In providing the Fund with investment supervision, it is recognized that the Subadviser will give primary consideration to securing the most favorable price and efficient execution. Within the framework of this policy, the Subadviser may consider the financial responsibility, research and investment information and other services provided by brokers, dealers or futures commission merchants who may effect or be a party to any such transaction or other transactions to which the Subadviser's other clients may be a party. It is understood that Prudential Securities Incorporated or any broker or dealer affiliated with the Subadviser may be used as principal broker for securities transactions, but that no formula has been adopted for allocation of the Fund's investment transaction business. It is also understood that it is desirable for the Fund that the Subadviser have access to supplemental investment and market research and security and economic analysis provided by brokers or futures commission merchants who may execute brokerage transactions at a higher cost to the Fund than may result when allocating brokerage to other brokers on the basis of seeking the most favorable price and efficient execution. Therefore, the Subadviser is authorized to place orders for the purchase and sale of securities and futures contracts for the Fund with such brokers or futures commission merchants, subject to review by the Trust's Board of Trustees from time to time with respect to the extent and continuation of this practice. It is understood that the services provided by such brokers or futures commission merchants may be useful to the Subadviser in connection with the Subadviser's services to other clients.
On occasions when the Subadviser deems the purchase or sale of a security or futures contract to be in the best interest of the Fund as well as other clients of the Subadviser, the Subadviser, to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities or futures contracts to be sold or purchased in order to obtain the most favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the securities or futures contracts so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Subadviser in the manner the Subadviser considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to such other clients.
(iv) The Subadviser shall maintain all books and records with respect
to the Fund's portfolio transactions required by subparagraphs (b)(5),
(6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the
1940 Act, and shall render to the Trust's Board of Trustees such
periodic and special reports as the Trustees may reasonably request.
The Subadviser shall make reasonably available its employees and
officers for consultation with any of the Trustees or officers or
employees of the Fund with respect to any matter discussed herein, including, without limitation, the valuation of the Fund's securities.
(v) The Subadviser shall provide the Fund's Custodian on each business day with information relating to all transactions concerning the portion of the Fund's assets it manages, and shall provide the Manager with such information upon request of the Manager.
(vi) The investment management services provided by the Subadviser hereunder are not to be deemed exclusive, and the Subadviser shall be free to render similar services to others. Conversely, Subadviser and Manager understand and agree that if the Manager manages the Fund in a "manager-of-managers" style, the Manager will, among other things, (i) continually evaluate the performance of the Subadviser through quantitative and qualitative analysis and consultations with the Subadviser; (ii) periodically make recommendations to the Trust's Board as to whether the contract with one or more subadvisers should be renewed, modified, or terminated; and (iii) periodically report to the Trust's Board regarding the results of its evaluation and monitoring functions. The Subadviser recognizes that its services may be terminated or modified pursuant to this process.
(b) The Subadviser shall authorize and permit any of its directors, officers and employees who may be elected as Trustees or officers of the Trust to serve in the capacities in which they are elected. Services to be furnished by the Subadviser under this Agreement may be furnished through the medium of any of such directors, officers or employees.
(c) The Subadviser shall keep the Fund's books and records required to be maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall timely furnish to the Manager all information relating to the Subadviser's services hereunder needed by the Manager to keep the other books and records of the Fund required by Rule 31a-1 under the 1940 Act. The Manager and Subadviser agree that all records that the Subadviser maintains for the Fund are the property of the Subadviser, and the Subadviser agrees to surrender promptly to the Fund copies of any of such records upon the Fund's request. The Subadviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any such records as are required to be maintained by it pursuant to paragraph 1(a) hereof.
(d) The Subadviser agrees to maintain adequate compliance procedures to ensure its compliance with the 1940 Act, the Investment Advisers Act of 1940, as amended, and other applicable state and federal regulations.
(e) The Subadviser shall furnish to the Manager copies of all records prepared in connection with (i) the performance of this Agreement and (ii) the operation of compliance procedures pursuant to paragraph 1(d) hereof as the Manager may reasonably request.
2. The Manager shall continue to have responsibility for all services to be provided to the Fund pursuant to the Management Agreement and, as more particularly discussed above, shall oversee and review the Subadviser's performance of its duties under this Agreement.
3. Each party represents and warrants to the other that it is (a) duly organized and existing and in good standing under the laws of its state of organization; (b) duly qualified to conduct its business in all jurisdictions that require such qualification; and (c) duly authorized to enter into and perform this Agreement.
4. For the services provided and the expenses assumed pursuant to this Agreement, the Manager shall pay the Subadviser as full compensation therefor, a fee equal to the percentage of the Fund's average daily net assets of the portion of the Fund managed by the Subadviser as described in the attached Schedule A. This fee will be computed daily and paid monthly.
5. The Subadviser shall not be liable for any error of judgment or for any loss suffered by the Fund or the Manager in connection with the matters to which this Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the Subadviser's part in the performance of its duties or from its reckless disregard of its obligations and duties under this Agreement.
6. This Agreement shall continue in effect for a period of more than two years from the date hereof only so long as such continuance is specifically approved at least annually in conformity with the requirements of the 1940 Act; provided, however, that this Agreement may be terminated by the Trust, on behalf of the Fund, at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, or by the Manager or the Subadviser at any time, without the payment of any penalty, on not more than 60 days' nor less than 30 days' written notice to the other party. This Agreement shall terminate automatically in the event of its assignment (as defined in the 1940 Act) or upon the termination of the Management Agreement. The Subadviser agrees that it will promptly notify the Trust and the Manager of the occurrence or anticipated occurrence of any event that would result in the assignment (as defined in the 1940 Act) of this Agreement, including, but not limited to, a change or anticipated change in control (as defined in the 1940 Act) of the Subadviser.
Any notice or other communication required to be given pursuant to Section 5 of this Agreement shall be deemed duly given if delivered or mailed by registered mail, postage prepaid, (1) to the Manager at Gateway Center Three, 100 Mulberry Street, 4th Floor, Newark, NJ 07102-4077, Attention: Secretary; (2) to the Trust at Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102-4077, Attention: Secretary; or (3) to the Subadviser at Two North LaSalle Street, Chicago, IL 60602-3790, Attention: Peg McLaughlin.
7. Nothing in this Agreement shall limit or restrict the right of any of the Subadviser's partners, principals, members, officers or employees who may also be a Trustee, officer or employee of the Trust or the Fund to engage in any other business or to devote his or her time and attention in part to the management or other aspects of any business, whether of a similar or a dissimilar nature, nor limit or restrict the Subadviser's right to engage in any other
business or to render services of any kind to any other corporation, firm, individual or association.
8. During the term of this Agreement, the Manager agrees to furnish the Subadviser at its principal office all prospectuses, proxy statements, reports to shareholders, sales literature or other material prepared for distribution to shareholders of the Fund or the public, which refer to the Subadviser in any way, prior to use thereof and not to use material if the Subadviser reasonably objects in writing five business days (or such other time as may be mutually agreed) after receipt thereof. Sales literature may be furnished to the Subadviser hereunder by first-class or overnight mail, facsimile transmission equipment or hand delivery.
9. This Agreement may be amended by mutual consent, but the consent of the Fund must be obtained in conformity with the requirements of the 1940 Act.
10. This Agreement shall be governed by the laws of the State of New York. This Agreement together with any other written agreements between the parties entered into concurrently with this Agreement contain the entire agreement between the parties with respect to the transactions contemplated hereby and supersede all previous oral or written negotiations, commitments and understandings related thereto. No waiver by one party of any obligation of the other hereunder shall be considered a waiver of any other obligation of such party. If any portion of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
PRUDENTIAL INVESTMENTS LLC HARRIS ASSOCIATES L.P.
By: /s/ Robert F. Gunia By: /s/ John R. Raitt
------------------------------ -----------------------------
Robert F. Gunia John R. Raitt
Executive Vice President Chief Operating Officer
5
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Schedule A
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Subadvisory Agreement dated April 5, 2002 between PI and Harris Associates L.P. with respect to the Strategic Partners Mid-Cap Value Fund, a series of Strategic Partners Opportunity Funds
Compensation Schedule
With respect to the Fund, the annual fee payable to the Subadviser as a percentage of average daily net assets of the Fund managed by the Subadviser:
0.55% on the first $1 billion in Fund assets, 0.45% on Fund assets over $1 billion.
As of April 5, 2002
Exhibit (i)
[Letterhead of Morris, Nichols, Arsht & Tunnell]
April 23, 2002
Strategic Partners Opportunity Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Ladies and Gentlemen:
We have acted as special Delaware counsel to Strategic Partners Opportunity Funds (formerly Strategic Partners Series), a Delaware business trust (the "Trust"), in connection with the formation of the Trust and certain matters relating to the proposed issuance of Class A, Class B, Class C and Class Z Shares of Strategic Partners Focused Growth Fund, a Series of the Trust (the "Focused Growth Fund Shares"), Class A, Class B, Class C and Class Z Shares of Strategic Partners Focused Value Fund, a Series of the Trust (the "Focused Value Fund Shares"), Class A, Class B, Class C and Class Z Shares of Strategic Partners Mid-Cap Value Fund, a Series of the Trust (the "Mid-Cap Value Fund Shares"), and Class A, Class B, Class C and Class Z Shares of Strategic Partners New Era Growth Fund, a Series of the Trust (the "New Era Growth Fund Shares" and collectively with the Focused Growth Fund Shares, the Focused Value Fund Shares and the Mid-Cap Value Fund Shares, the "Shares"). Capitalized terms used herein and not otherwise herein defined are used as defined in the Agreement and Declaration of Trust of the Trust dated January 26, 2000, as amended by resolutions of the Trustees of the Trust adopted on May 22, 2001 (the "Governing Instrument").
In rendering this opinion, we have examined and relied upon copies of the following documents, each in the form provided to us: the Certificate of Trust of the Trust as filed in the Office of the Secretary of State of the State of Delaware (the "State Office") on January 28, 2000 (the "Certificate"); the Certificate of Amendment to the Certificate as filed in the State Office on September 4, 2001; the Governing Instrument; the By-laws of the Trust; a Unanimous Written Consent of the Board of Trustees of the Trust dated January 28, 2000 (the "Consent"); certain resolutions of the Trustees of the Trust dated May 24, 2000, August 23, 2000, November 14, 2000, May 22, 2001 and February 26, 2002
Strategic Partners Opportunity Fund
April 23, 2002
(the "Resolutions"); the Notification of Registration Filed Pursuant to Section
8(a) of the Investment Company Act of 1940 on Form N-8A of the Trust filed with
the Securities and Exchange Commission on February 1, 2000; Post-Effective
Amendment No. 9 to Registration Statement No. 333-95849 under the Securities Act
of 1933 (including the Prospectus and Statement of Additional Information
forming a part thereof) on Form N-1A to be filed with the Securities and
Exchange Commission on or about the date hereof (the "Registration Statement"
and, together with the Governing Instrument, the By-laws of the Trust, the
Consent and the Resolutions, the "Operative Documents"); and a certification of
good standing of the Trust obtained as of a recent date from the State Office.
In such examinations, we have assumed the genuineness of all signatures, the
conformity to original documents of all documents submitted to us as copies or
drafts of documents to be executed, and the legal capacity of natural persons to
complete the execution of documents. We have further assumed for the purpose of
this opinion: (i) the due adoption, authorization, execution and delivery by, or
on behalf of, each of the parties thereto of the above-referenced resolutions,
instruments, certificates and other documents, and of all documents contemplated
by the Operative Documents to be executed by investors acquiring Shares; (ii)
the payment of consideration for Shares, and the application of such
consideration, as provided in the Operative Documents, and compliance with the
other terms, conditions and restrictions set forth in the Operative Documents in
connection with the issuance of Shares (including, without limitation, the
taking of all appropriate action by the Trustees to designate Series of Shares
and the rights and preferences attributable thereto as contemplated by the
Governing Instrument); (iii) that appropriate notation of the names and
addresses of, the number of Shares held by, and the consideration paid by,
Shareholders will be maintained in the appropriate registers and other books and
records of the Trust in connection with the issuance, redemption or transfer of
Shares; (iv) that no event has occurred subsequent to the filing of the
Certificate that would cause a termination or reorganization of the Trust or any
Series under Section 2 or Section 3 of Article VIII of the Governing Instrument
or, in the case of a Series, under Section 6(h) of Article III of the Governing
Instrument; (v) that the activities of the Trust have been and will be conducted
in accordance with the terms of the Governing Instrument and the Delaware
Business Trust Act, 12 Del. C. ss.ss. 3801 et seq. (the "Delaware Act"); and
(vi) that each of the documents examined by us is in full force and effect,
expresses the entire understanding of the parties thereto with respect to the
subject matter thereof and has not been amended, supplemented or otherwise
modified, except as herein referenced. No opinion is expressed herein with
respect to the requirements of, or compliance with, federal or state securities
or blue sky laws. Further, we have not participated in the preparation of the
Registration Statement or any other offering documentation relating to the Trust
or the Shares and we assume no responsibility for their contents. As to any
facts material to our opinion, other than those assumed, we have relied without
independent investigation on the above-referenced documents and on the accuracy,
as of the date hereof, of the matters therein contained.
Strategic Partners Opportunity Fund
April 23, 2002
Based on and subject to the foregoing, and limited in all respects to matters of Delaware law, it is our opinion that:
1. The Trust is a duly formed and validly existing business trust in good standing under the laws of the State of Delaware.
2. The issuance of the Shares has been duly authorized on behalf of the Trust and the Shares, when issued to Shareholders in accordance with the terms, conditions, requirements and procedures and for the consideration set forth in the Operative Documents, will constitute legally issued, fully paid and non-assessable Shares of beneficial interest in the Trust.
3. Under the Delaware Act and the terms of the Governing Instrument, each Shareholder of the Trust, in such capacity, will be entitled to the same limitation of personal liability as that extended to stockholders of private corporations for profit organized under the general corporation law of the State of Delaware; provided, however, that we express no opinion with respect to the liability of any Shareholder who is, was or may become a named Trustee of the Trust. Neither the existence nor exercise of the voting rights granted to Shareholders under the Governing Instrument will, of itself, cause a Shareholder to be deemed a trustee of the Trust under the Delaware Act. Notwithstanding the foregoing or the opinion expressed in paragraph 2 above, we note that, pursuant to Section 5 of Article IV of the Governing Instrument, the Trustees have the power to cause Shareholders, or Shareholders of a particular Series, to pay certain custodian, transfer, servicing or similar agent charges by setting off the same against declared but unpaid dividends or by reducing Share ownership (or by both means).
We hereby consent to the filing of a copy of this opinion with the Securities and Exchange Commission with the Registration Statement. In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. This opinion speaks only as of the date hereof and is based on our understandings and assumptions as to present facts and our review of the above referenced documents and the application of Delaware law as the same exist on the date hereof, and we undertake no obligation to update or supplement this opinion after the date hereof for the benefit of any person or entity with respect to any facts or circumstances that may hereafter come to our attention or any changes in facts or law that may hereafter occur or take effect. Except as provided in this paragraph, the opinions set forth above are expressed solely for the benefit of the addressee hereof in connection with the matters contemplated hereby and may not be relied upon for any other purpose or by any other person or entity without our prior written consent.
Sincerely,
MORRIS, NICHOLS, ARSHT & TUNNELL
Exhibit (j)
We hereby consent to the incorporation by reference in this Registration Statement on Form N-1A of our reports dated April 12, 2002, relating to the financial statements and financial highlights which appear in the February 28, 2002 Annual Reports to Shareholders of Strategic Partners Opportunity Funds (consisting of Strategic Partners Focused Growth Fund, Strategic Partners Focused Value Fund, and Strategic Partners New Era Growth Fund), which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Financial Statements", "Other Service Providers" and "Financial Highlights" in such Registration Statement.
PricewaterhouseCoopers LLP
New York, New York
April 23, 2002
Exhibit(m)(1)
STRATEGIC PARTNERS OPPORTUNITY FUNDS
The Distribution and Service Plan set forth below (the "Plan"), which is designed to conform to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act"), and Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc. (the "NASD"), has been adopted by Strategic Partners Opportunity Funds (formerly Strategic Partners Series) (the "Trust"), on behalf of each series listed on Schedule A attached hereto, as amended from time to time (each such series a "Fund"), and by Prudential Investment Management Services LLC, the Fund's distributor (the "Distributor").
The Trust has entered into a distribution agreement pursuant to which the Fund will employ the Distributor to distribute Class A shares issued by the Fund ("Class A shares"). Under the Plan, the Fund intends to pay to the Distributor, as compensation for its services, a distribution and service fee with respect to Class A shares.
A majority of the Board of Trustees of the Trust (the "Board"), including a majority of those Trustees who are not "interested persons" of the Trust (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Rule 12b-1 Trustees"), have determined by votes cast in person at a meeting called for the purpose of voting on this Plan that there is a reasonable likelihood that adoption of this Plan will benefit the Fund and its shareholders. Expenditures under this Plan by the Fund for Distribution Activities (defined below) are primarily intended to result in the sale of Class A
shares of the Fund within the meaning of paragraph (a)(2) of Rule 12b-1 under the 1940 Act.
The purpose of the Plan is to create incentives to the Distributor and/or other qualified broker-dealers and their account executives to provide distribution assistance to their customers who are investors in the Fund, to defray the costs and expenses associated with the preparation, printing and distribution of prospectuses and sales literature and other promotional and distribution activities and to provide for the servicing and maintenance of shareholder accounts.
The material aspects of the Plan are as follows:
The Fund shall engage the Distributor to distribute Class A shares of the Fund and to service shareholder accounts using all of the facilities of the Distributor's distribution network, including sales personnel and branch office and central support systems, and also using such other qualified broker-dealers and financial institutions as the Distributor may select, including Prudential Securities Incorporated ("Prudential Securities") and Pruco Securities Corporation ("Prusec"). Services provided and activities undertaken to distribute Class A shares of the Fund are referred to herein as "Distribution Activities."
The Fund shall pay to the Distributor as compensation for providing personal service and/or maintaining shareholder accounts an annual service fee of 0.25% of the average daily net assets of the Class A shares ("service fee"). The Fund shall calculate and accrue daily amounts
payable by the Class A shares of the Fund hereunder and shall pay such amounts monthly or at such other intervals as the Board may determine.
The Fund shall pay to the Distributor as compensation for its services an annual distribution fee, together with the service fee (described in Section 2 hereof), of 0.30% of the average daily net assets of the Class A shares of the Fund for the performance of Distribution Activities. The Fund shall calculate and accrue daily amounts payable by the Class A shares of the Fund hereunder and shall pay such amounts monthly or at such other intervals as the Board may determine. Amounts payable under the Plan shall be subject to the limitations of Rule 2830 of the NASD Conduct Rules.
Amounts paid to the Distributor by the Class A shares of the Fund will not be used to pay the distribution expenses incurred with respect to any other class of shares of the Fund except that distribution expenses attributable to the Fund as a whole will be allocated to the Class A shares according to the ratio of the sales of Class A shares to the total sales of the Fund's shares over the Fund's fiscal year or such other allocation method approved by the Board. The allocation of distribution expenses among classes will be subject to the review of the Board.
The Distributor shall spend such amounts as it deems appropriate on Distribution Activities that include, among others:
(a) sales commissions and trailer commissions paid to, or on account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated with Distribution Activities, including central office and branch expenses;
(c) amounts paid to Prudential Securities or Prusec for performing services under a selected dealer agreement between Prudential Securities or Prusec and the Distributor for sale of Class A shares of the Fund, including sales commissions, trailer commissions paid to, or on account of, agents and indirect and overhead costs associated with Distribution Activities;
(d) advertising for the Fund in various forms through any available medium, including the cost of printing and mailing Fund prospectuses, statements of additional information and periodic financial reports and sales literature to persons other than current shareholders of the Fund; and
(e) sales commissions (including trailer commissions) paid to, or on account of, broker-dealers and financial institutions (other than Prudential Securities or Prusec) that have entered into selected dealer agreements with the Distributor with respect to Class A shares of the Fund.
An appropriate officer of the Trust will provide to the Board for review, at least quarterly, a written report specifying in reasonable detail the amounts expended for Distribution Activities (including payment of the service fee) and the purposes for which such expenditures were made in compliance with the requirements of Rule 12b-1. The Distributor will provide to the Board such additional information as the Board shall from time to time reasonably request, including information about Distribution Activities undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of the commissions and account servicing fees to be paid by the Distributor to account executives of the Distributor and to broker-dealers and financial institutions that have entered into selected dealer agreements with the Distributor.
The Plan shall not take effect until it has been approved by a vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Class A shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities of the Class A shares of the Fund, the Plan shall, unless earlier terminated in accordance with its terms, continue in full force and effect thereafter for so long as such continuance is specifically approved at least annually by a majority of the Board and a majority of the Rule 12b-1 Trustees by votes cast in person at a meeting called for the purpose of voting on the continuation of the Plan.
This Plan may be terminated at any time, without the payment of any penalty, by a majority of the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Class A shares of the Fund.
The Plan may not be amended to change the combined service and distribution fees to be paid as provided for in Sections 2 and 3 hereof so as to increase materially the amounts payable under this Plan unless such amendment shall be approved by the vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Class A shares of the Fund. All material amendments of the Plan, including the addition of further series to Schedule A, shall be approved by a majority of the Board and a majority of the Rule 12b-1 Trustees by votes cast in person at a meeting called for the purpose of voting on the Plan.
While the Plan is in effect, the selection and nomination of the Trustees shall be committed to the discretion of the Rule 12b-1 Trustees.
The Trust shall preserve copies of the Plan and any related agreements and all reports made pursuant to Section 4 hereof, for a period of not less than six years from the date of effectiveness of the Plan, such agreements or reports, and for at least the first two years in an easily accessible place.
Dated: February 26, 2002
SCHEDULE A
Funds Covered by the Class A Distribution and Service (12b-1) Plan Adopted by Strategic Partners Opportunity Funds and Prudential Investment Management Services LLC dated February 26, 2002
------------------------------------------------------------------------------------------------------ Fund Date Added to Distribution and Service (12b-1) Plan ------------------------------------------------------------------------------------------------------ Strategic Partners Focused Growth Fund February 26, 2002 ------------------------------------------------------------------------------------------------------ Strategic Partners New Era Growth Fund February 26, 2002 ------------------------------------------------------------------------------------------------------ Strategic Partners Focused Value Fund February 26, 2002 ------------------------------------------------------------------------------------------------------ Strategic Partners Market Opportunity Fund February 26, 2002 ------------------------------------------------------------------------------------------------------ Strategic Partners Mid-Cap Value Fund February 26, 2002 ------------------------------------------------------------------------------------------------------ |
Exhibit(m)(2)
STRATEGIC PARTNERS OPPORTUNITY FUNDS
The Distribution and Service Plan set forth below (the "Plan"), which is designed to conform to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act"), and Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc. (the "NASD"), has been adopted by Strategic Partners Opportunity Funds (formerly Strategic Partners Series) (the "Trust"), on behalf of each series listed on Schedule A attached hereto, as amended from time to time (each such series a "Fund"), and by Prudential Investment Management Services LLC, the Fund's distributor (the "Distributor").
The Trust has entered into a distribution agreement pursuant to which the Fund will employ the Distributor to distribute Class B shares issued by the Fund ("Class B shares"). Under the Plan, the Fund intends to pay to the Distributor, as compensation for its services, a distribution and service fee with respect to Class B shares.
A majority of the Board of Trustees of the Trust (the "Board"), including a majority of those Trustees who are not "interested persons" of the Trust (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Rule 12b-1 Trustees"), have determined by votes cast in person at a meeting called for the purpose of voting on this Plan that there is a reasonable likelihood that adoption of this Plan will benefit the Fund and its shareholders. Expenditures under this Plan by the Fund for Distribution Activities (defined below) are primarily intended to result in the sale of Class B
shares of the Fund within the meaning of paragraph (a)(2) of Rule 12b-1 under the 1940 Act.
The purpose of the Plan is to create incentives to the Distributor and/or other qualified broker-dealers and their account executives to provide distribution assistance to their customers who are investors in the Fund, to defray the costs and expenses associated with the preparation, printing and distribution of prospectuses and sales literature and other promotional and distribution activities and to provide for the servicing and maintenance of shareholder accounts.
The material aspects of the Plan are as follows:
The Fund shall engage the Distributor to distribute Class B shares of the Fund and to service shareholder accounts using all of the facilities of the Distributor's distribution network including sales personnel and branch office and central support systems, and also using such other qualified broker-dealers and financial institutions as the Distributor may select, including Prudential Securities Incorporated ("Prudential Securities") and Pruco Securities Corporation ("Prusec"). Services provided and activities undertaken to distribute Class B shares of the Fund are referred to herein as "Distribution Activities."
The Fund shall pay to the Distributor as compensation for providing personal service and/or maintaining shareholder accounts an annual service fee of 0.25% of the average daily net assets of the Class B shares ("service fee"). The Fund shall calculate and accrue daily amounts
payable by the Class B shares of the Fund hereunder and shall pay such amounts monthly or at such other intervals as the Board may determine.
The Fund shall pay to the Distributor as compensation for its services an annual distribution fee of 0.75% of the average daily net assets of the Class B shares of the Fund for the performance of Distribution Activities. The Fund shall calculate and accrue daily amounts payable by the Class B shares of the Fund hereunder and shall pay such amounts monthly or at such other intervals as the Board may determine. Amounts payable under the Plan shall be subject to the limitations of Rule 2830 of the NASD Conduct Rules.
Amounts paid to the Distributor by the Class B shares of the Fund will not be used to pay the distribution expenses incurred with respect to any other class of shares of the Fund except that distribution expenses attributable to the Fund as a whole will be allocated to the Class B shares according to the ratio of the sale of Class B shares to the total sales of the Fund's shares over the Fund's fiscal year or such other allocation method approved by the Board. The allocation of distribution expenses among classes will be subject to the review of the Board. Payments hereunder will be applied to distribution expenses in the order in which they are incurred, unless otherwise determined by the Board.
The Distributor shall spend such amounts as it deems appropriate on Distribution Activities that include, among others:
(a) sales commissions (including trailer commissions) paid to, or on account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated with performance of Distribution Activities including central office and branch expenses;
(c) amounts paid to Prudential Securities or Prusec for performing services under a selected dealer agreement between Prudential Securities or Prusec and the Distributor for sale of Class B shares of the Fund, including sales commissions and trailer commissions paid to, or on account of, agents and indirect and overhead costs associated with Distribution Activities;
(d) advertising for the Fund in various forms through any available medium, including the cost of printing and mailing Fund prospectuses, statements of additional information and periodic financial reports and sales literature to persons other than current shareholders of the Fund; and
(e) sales commissions (including trailer commissions) paid to, or on account of, broker-dealers and other financial institutions (other than Prudential Securities or Prusec) that have entered into selected dealer agreements with the Distributor with respect to Class B shares of the Fund.
An appropriate officer of the Trust will provide to the Board for review, at least quarterly, a written report specifying in reasonable detail the amounts expended for Distribution Activities (including payment of the service fee) and the purposes for which such expenditures were made in compliance with the requirements of Rule 12b-1. The Distributor will provide to the Board such additional information as they shall from time to time reasonably request, including information about Distribution Activities undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of the commissions and account servicing fees to be paid by the Distributor to account executives of the Distributor and to broker-dealers and other financial institutions that have entered into selected dealer agreements with the Distributor.
The Plan shall not take effect until it has been approved by a vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Class B shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities of the Class B shares of the Fund, the Plan shall, unless earlier terminated in accordance with its terms, continue in full force and effect thereafter for so long as such continuance is specifically approved at least annually by a majority of the Board and a majority of the Rule 12b-1 Trustees by votes cast in person at a meeting called for the purpose of voting on the continuation of the Plan.
This Plan may be terminated at any time, without the payment of any penalty, by a majority of the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Class B shares of the Fund.
The Plan may not be amended to change the combined service and distribution expenses to be paid as provided for in Sections 2 and 3 hereof so as to increase materially the amounts payable under this Plan unless such amendment shall be approved by the vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Class B shares of the Fund. All material amendments of the Plan, including the addition of further series to Schedule A, shall be approved by a majority of the Board and a majority of the Rule 12b-1 Trustees by votes cast in person at a meeting called for the purpose of voting on the Plan.
While the Plan is in effect, the selection and nomination of the Rule 12b-1 Trustees shall
be committed to the discretion of the Rule 12b-1 Trustees.
The Trust shall preserve copies of the Plan and any related agreements and all reports made pursuant to Section 4 hereof, for a period of not less than six years from the date of effectiveness of the Plan, such agreements or reports, and for at least the first two years in an easily accessible place.
Dated: February 26, 2002
SCHEDULE A
Funds Covered by the Class B Distribution and Service (12b-1) Plan Adopted by Strategic Partners Opportunity Funds and Prudential Investment Management Services LLC dated February 26, 2002
--------------------------------------------------------------------------------------------------------------- Fund Date Added to Distribution and Service (12b-1) Plan ------------------------------------------------------- ------------------------------------------------------- Strategic Partners Focused Growth Fund February 26, 2002 ------------------------------------------------------- ------------------------------------------------------- Strategic Partners New Era Growth Fund February 26, 2002 ------------------------------------------------------- ------------------------------------------------------- Strategic Partners Focused Value Fund February 26, 2002 ------------------------------------------------------- ------------------------------------------------------- Strategic Partners Market Opportunity Fund February 26, 2002 ------------------------------------------------------- ------------------------------------------------------- Strategic Partners Mid-Cap Value Fund February 26, 2002 ------------------------------------------------------- ------------------------------------------------------- |
Exhibit(m)(3)
STRATEGIC PARTNERS OPPORTUNITY FUNDS
The Distribution and Service Plan set forth below (the "Plan"), which is designed to conform to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act"), and Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc. (the "NASD"), has been adopted by Strategic Partners Opportunity Funds (formerly Strategic Partners Series) (the "Trust"), on behalf of each series listed on Schedule A attached hereto, as amended from time to time (each such series a "Fund"), and by Prudential Investment Management Services LLC, the Fund's distributor (the "Distributor").
The Trust has entered into a distribution agreement pursuant to which the Fund will employ the Distributor to distribute Class C shares issued by the Fund ("Class C shares"). Under the Plan, the Fund intends to pay to the Distributor, as compensation for its services, a distribution and service fee with respect to Class C shares.
A majority of the Board of Trustees of the Trust (the "Board"), including a majority of those Trustees who are not "interested persons" of the Trust (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Rule 12b-1 Trustees"), have determined by votes cast in person at a meeting called for the purpose of voting on this Plan that there is a reasonable likelihood that adoption of this Plan will benefit the Fund and its shareholders. Expenditures under this Plan by the Fund for Distribution Activities (defined below) are primarily intended to result in the sale of Class C
shares of the Fund within the meaning of paragraph (a)(2) of Rule 12b-1 under the 1940 Act.
The purpose of the Plan is to create incentives to the Distributor and/or other qualified broker-dealers and their account executives to provide distribution assistance to their customers who are investors in the Fund, to defray the costs and expenses associated with the preparation, printing and distribution of prospectuses and sales literature and other promotional and distribution activities and to provide for the servicing and maintenance of shareholder accounts.
The material aspects of the Plan are as follows:
The Fund shall engage the Distributor to distribute Class C shares of the Fund and to service shareholder accounts using all of the facilities of the Distributor's distribution network including sales personnel and branch office and central support systems, and also using such other qualified broker-dealers and financial institutions as the Distributor may select, including Prudential Securities Incorporated ("Prudential Securities") and Pruco Securities Corporation ("Prusec"). Services provided and activities undertaken to distribute Class C shares of the Fund are referred to herein as "Distribution Activities."
The Fund shall pay to the Distributor as compensation for providing personal service and/or maintaining shareholder accounts an annual service fee of 0.25% of the average daily net assets of the Class C shares ("service fee"). The Fund shall calculate and accrue daily amounts
payable by the Class C shares of the Fund hereunder and shall pay such amounts monthly or at such other intervals as the Board may determine.
The Fund shall pay to the Distributor as compensation for its services an annual distribution fee of 0.75% of the average daily net assets of the Class C shares of the Fund for the performance of Distribution Activities. The Fund shall calculate and accrue daily amounts payable by the Class C shares of the Fund hereunder and shall pay such amounts monthly or at such other intervals as the Board may determine. Amounts payable under the Plan shall be subject to the limitations of Rule 2830 of the NASD Conduct Rules.
Amounts paid to the Distributor by the Class C shares of the Fund will not be used to pay the distribution expenses incurred with respect to any other class of shares of the Fund except that distribution expenses attributable to the Fund as a whole will be allocated to the Class C shares according to the ratio of the sale of Class C shares to the total sales of the Fund's shares over the Fund's fiscal year or such other allocation method approved by the Board. The allocation of distribution expenses among classes will be subject to the review of the Board. Payments hereunder will be applied to distribution expenses in the order in which they are incurred, unless otherwise determined by the Board.
The Distributor shall spend such amounts as it deems appropriate on Distribution Activities that include, among others:
(a) sales commissions (including trailer commissions) paid to, or on account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated with performance of Distribution Activities including central office and branch expenses;
(c) amounts paid to Prudential Securities or Prusec for performing services under a selected dealer agreement between Prudential Securities or Prusec and the Distributor for sale of Class C shares of the Fund, including sales commissions and trailer commissions paid to, or on account of, agents and indirect and overhead costs associated with Distribution Activities;
(d) advertising for the Fund in various forms through any available medium, including the cost of printing and mailing Fund prospectuses, statements of additional information and periodic financial reports and sales literature to persons other than current shareholders of the Fund; and
(e) sales commissions (including trailer commissions) paid to, or on account of, broker-dealers and other financial institutions (other than Prudential Securities or Prusec) that have entered into selected dealer agreements with the Distributor with respect to Class C shares of the Fund.
An appropriate officer of the Trust will provide to the Board for review, at least quarterly, a written report specifying in reasonable detail the amounts expended for Distribution Activities (including payment of the service fee) and the purposes for which such expenditures were made in compliance with the requirements of Rule 12b-1. The Distributor will provide to the Board such additional information as they shall from time to time reasonably request, including information about Distribution Activities undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of the commissions and account servicing fees to be paid by the Distributor to account executives of the Distributor and to broker-dealers and other financial institutions that have entered into selected dealer agreements with the Distributor.
The Plan shall not take effect until it has been approved by a vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Class C shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities of the Class C shares of the Fund, the Plan shall, unless earlier terminated in accordance with its terms, continue in full force and effect thereafter for so long as such continuance is specifically approved at least annually by a majority of the Board and a majority of the Rule 12b-1 Trustees by votes cast in person at a meeting called for the purpose of voting on the continuation of the Plan.
This Plan may be terminated at any time, without the payment of any penalty, by a majority of the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Class C shares of the Fund.
The Plan may not be amended to change the combined service and distribution expenses to be paid as provided for in Sections 2 and 3 hereof so as to increase materially the amounts payable under this Plan unless such amendment shall be approved by the vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Class C shares of the Fund. All material amendments of the Plan, including the addition of further series to Schedule A, shall be approved by a majority of the Board and a majority of the Rule 12b-1 Trustees by votes cast in person at a meeting called for the purpose of voting on the Plan.
While the Plan is in effect, the selection and nomination of the Rule 12b-1 Trustees shall
be committed to the discretion of the Rule 12b-1 Trustees.
The Trust shall preserve copies of the Plan and any related agreements and all reports made pursuant to Section 4 hereof, for a period of not less than six years from the date of effectiveness of the Plan, such agreements or reports, and for at least the first two years in an easily accessible place.
Dated: February 26, 2002
SCHEDULE A
Funds Covered by the Class C Distribution and Service (12b-1) Plan Adopted by Strategic Partners Opportunity Funds and Prudential Investment Management Services LLC dated February 26, 2002
-------------------------------------------------------------------------------------------------------- Fund Date Added to Distribution and Service (12b-1) Plan -------------------------------------------------------------------------------------------------------- Strategic Partners Focused Growth Fund February 26, 2002 -------------------------------------------------------------------------------------------------------- Strategic Partners New Era Growth Fund February 26, 2002 -------------------------------------------------------------------------------------------------------- Strategic Partners Focused Value Fund February 26, 2002 -------------------------------------------------------------------------------------------------------- Strategic Partners Market Opportunity Fund February 26, 2002 -------------------------------------------------------------------------------------------------------- Strategic Partners Mid-Cap Value Fund February 26, 2002 -------------------------------------------------------------------------------------------------------- |
EXHIBIT(N)
STRATEGIC PARTNERS FUNDS
AMENDED AND RESTATED RULE 18F-3PLAN
Each investment company listed on Exhibit A attached hereto (each a "Trust") hereby adopts this plan pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940 Act"), setting forth the separate arrangement and expense allocation of each class of shares in each series of the Trust (each a "Fund"), also listed on Exhibit A. Any material amendment to this plan with respect to a Trust is subject to prior approval of the Trust's Board of Trustees (the "Board"), including a majority of the Trustees who are not interested persons of the Trust (the "Independent Trustees").
CLASS CHARACTERISTICS
Class A Shares: Class A shares are subject to a high initial sales charge and
--------------- an annual distribution and/or service fee pursuant to Rule 12b-1
under the 1940 Act ("Rule 12b-1 fee") not to exceed 0.30% of the
average daily net assets of the class. The initial sales charge is
waived or reduced for certain eligible investors. Investors who
purchase $1 million or more of Class A shares are subject to a
contingent deferred sales charge ("CDSC") of 1% on shares that are
redeemed within 12 months of purchase. The CDSC is waived for all
such Class A shareholders other than those who purchased their
shares through certain broker-dealers that are not affiliated with
Prudential Financial, Inc.
Class B Shares: Class B shares are not subject to an initial sales charge but are
--------------- subject to a high CDSC (declining from 5% to zero over a six-year
period) that will be imposed on certain redemptions and an annual
Rule 12b-1 fee not to exceed 1% of the average daily net assets of
the class. The CDSC is waived for certain eligible investors.
Class B shares automatically convert to Class A shares
approximately seven years after purchase.
Class C Shares: Class C shares are subject to a low initial sales charge and a 1%
--------------- CDSC which will be imposed on certain redemptions within the first
18 months after purchase and an annual Rule 12b-1 fee not to
exceed 1% of the average daily net assets of the class. The
initial sales charge is waived or reduced for certain eligible
investors.
Class Z Shares: Class Z shares are not subject to either an initial sales charge or
-------------- CDSC, nor are they subject to any Rule 12b-1 fee.
|
INCOME AND EXPENSE ALLOCATIONS
Income, any realized and unrealized capital gains and losses, and expenses not allocated to a particular class of a Portfolio will be allocated to each class of such Fund on the basis of the net asset value of that class in relation to the net asset value of the Fund.
DIVIDENDS AND DISTRIBUTIONS
Dividends and other distributions paid by each Fund to each class of shares, to the extent paid, will be paid on the same day and at the same time, and will be determined in the same manner and will be in the same amount, except that the amount of the dividends and other distributions declared and paid by a particular class of the Fund may be different from that paid by another class of the Fund because of Rule 12b-1 fees and other expenses borne exclusively by that class.
EXCHANGE PRIVILEGE
Holders of Class A, Class B, Class C and Class Z shares shall have such exchange privileges as set forth in each Trust's current prospectus or prospectuses. Exchange privileges may vary among classes and among holders of a Class.
CONVERSION FEATURES
Class B shares will automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. Conversions will be effected at relative net asset value without the imposition of any additional sales charge.
GENERAL
A. Each class of shares shall have exclusive voting rights on any matter submitted to shareholders that relates solely to its arrangement and shall have separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class.
B. On an ongoing basis, the Board, pursuant to its fiduciary responsibilities under the 1940 Act and otherwise, will monitor each Trust for the existence of any material conflicts among the interests of its several classes. The Board, including a majority of the Independent Trustees, shall take such action as is reasonably necessary to eliminate any such conflicts that may develop. Prudential Investments LLC, each Trust's manager, will be responsible for reporting any potential or existing conflicts to the Board.
C. For purposes of expressing an opinion on the financial statements of each Fund of each Trusts, the methodology and procedures for calculating the net asset value and dividends/distributions of the Trust's several classes and the proper allocation of income and expenses among such classes will be examined annually by the Trust's independent accountants who, in performing such examination, shall consider the factors set forth in the relevant auditing standards adopted, from time to time, by the American Institute of Certified Public Accountants.
Exhibit A
List of Investment Companies and their Series Operating Pursuant to the Strategic Partners Funds Amended and Restated Rule 18f-3 Plan
Strategic Partners Asset Allocation Funds:
Strategic Partners Conservative Growth Fund
Strategic Partners Moderate Growth Fund
Strategic Partners High Growth Fund
Strategic Partners Opportunity Funds:
Strategic Partners Focused Growth Fund
Strategic Partners New Era Growth Fund Strategic Partners Focused Value Fund Strategic Partners Mid-Cap Value Fund Strategic Partners Market Opportunity Fund
Strategic Partners Style Specific Funds:
Strategic Partners Large Capitalization Growth Fund
Strategic Partners Large Capitalization Value Fund
Strategic Partners Small Capitalization Growth Fund
Strategic Partners Small Capitalization Value Fund
Strategic Partners International Equity Fund
Strategic Partners Total Return Bond Fund
Dated: April 23, 2002
Exhibit (p)(3)
January 2001
Code of Ethics and Statement of Policy and Procedures Regarding Personal Securities Transactions
(a) Alliance Capital Management L.P. ("Alliance", "we" or "us") is a registered investment adviser and acts as investment manager or adviser to investment companies and other Clients. In this capacity, we serve as fiduciaries and owe our Clients an undivided duty of loyalty. We must avoid even the appearance of a conflict that may compromise the trust Clients have placed in us and must insist on strict adherence to fiduciary standards and compliance with all applicable federal and state securities laws. Adherence to this Code of Ethics and Statement of Policy and Procedures Regarding Personal Securities Transactions (the "Code and Statement") is a fundamental condition of service with us, any of our subsidiaries or our general partner (the "Alliance Group").
(b) The Code and Statement is intended to comply with Rule 17j-1 under the Investment Company Act which applies to us because we serve as an investment adviser to registered investment companies. Rule 17j-1 specifically requires us to adopt a code of ethics that contains provisions reasonably necessary to prevent our "access persons" (defined in Rule 17j-1 to cover persons such as officers, directors, portfolio managers, traders, research analysts and others) from engaging in fraudulent conduct, including insider trading. Each investment company we advise has also adopted a code of ethics with respect to its access persons. As set forth in Section 3 below, our Code and Statement applies to all Employees and all other individuals who are Access Persons. The Code and Statement is also intended to comply with the provisions of Rule 204-2 under the Investment Advisers Act of 1940 (the "Advisers Act") which requires us to maintain records of securities transactions in which certain of our personnel have any Beneficial Ownership.
(c) All Employees and all other individuals who are Access Persons to (collectively, "you") also serve as fiduciaries with respect to our Clients and in this capacity you owe an undivided duty of loyalty to our Clients. As part of this duty and as expressed throughout the Code and Statement, you must at all times:
(i) Place the interests of our Clients first;
(ii) Conduct all personal securities transactions consistent with this Code and Statement and in such a manner that avoids any actual or potential conflict of interest or any abuse of your responsibility and position of trust; and
(iii) Abide by the fundamental standard that you not take inappropriate advantage of your position.
(d) This Code and Statement does not attempt to identify all possible conflicts of interests and literal compliance with each of the specific procedures will not shield you from liability for personal trading or other conduct which violates your fiduciary duties to our Clients. In addition to the specific prohibitions contained in this Code and Statement, you are also subject to a general requirement not to engage in any act or practice that would defraud our Clients. This general prohibition includes, in connection with the purchase or sale of a Security held or to be acquired or sold (as this phrase is defined below in Section 2(k)) by a Client:
(i) Making any untrue statement of a material fact;
(ii) Creating materially misleading impressions by omitting to state or failing to provide any information necessary to make any statements made, in light of the circumstances in which they are made, not misleading;
(iii) Making investment decisions, changes in research ratings and trading decisions other than exclusively for the benefit of and in the best interest of our Clients;
(iv) Using information about investment or trading decisions or changes in research ratings (whether considered, proposed or made) to benefit or avoid economic injury to you or anyone other than our Clients;
(v) Taking, delaying or omitting to take any action with respect to any research recommendation, report or rating or any investment or trading decision for a Client in order to avoid economic injury to you or anyone other than our Clients;
(vi) Purchasing or selling a Security on the basis of knowledge of a possible trade by or for a Client;
(vii) Revealing to any other person (except in the normal course of your duties on behalf of a Client) any information regarding Securities transactions by any Client or the consideration by any Client of Alliance of any such Securities transactions; or
(viii) Engaging in any manipulative practice with respect to any Client.
The following definitions apply for purposes of the Code and Statement in addition to the definitions contained in the text itself.
(a) "Access Person" means any director or officer of the general partner of Alliance, as well as any of the following persons:
(i) any Employee who, in connection with his or her
regular functions or duties --
(A) makes, participates in, or obtains
information regarding the purchase or sale
of a Security by a Client, or whose
functions relate to the making of any
recommendations with respect to such
purchases or sales;
(B) obtains information from any source
regarding any change, or consideration of
any change in Alliance's internal research
coverage, a research rating or an internally
published view on a Security or issuer; or
(C) obtains information from any source
regarding the placing or execution of an
order for a Client account; and
(ii) any natural person having the power to exercise a
controlling influence over the management or policies
of Alliance (unless that power is solely the result
of his or her position with Alliance) who:
(A) obtains information concerning
recommendations made to a Client with
regard to the purchase or sale of a
Security;
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(B) obtains information from any source regarding any change, or consideration of any change in research coverage, research rating or a published view on a Security or issuer; and
(C) obtains information from any source regarding the placing or execution of an order for a Client account.
(b) A Security is "being considered for purchase or sale" when:
(i) an Alliance research analyst issues research information (including as part of the daily morning call) regarding initial coverage of, or changing a rating with respect to, a Security;
(ii) a portfolio manager has indicated (during the daily morning call or otherwise) his or her intention to purchase or sell a Security;
(iii) a portfolio manager places an order for a Client; or
(iv) a portfolio manager gives a trader discretion to execute an order for a Client over a specified period of time.
(c) "Beneficial Ownership" is interpreted in the same manner as in
determining whether a person is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 ("Exchange
Act"), Rule 16a-1 and the other rules and regulations
thereunder and includes
ownershipby any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in a Security. For example, an individual has an indirect pecuniary interest in any Security owned by the individual's spouse. Beneficial Ownership also includes, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, having or sharing "voting power" or "investment power," as those terms are used in Section 13(d) of the Exchange Act and Rule 13d-3 thereunder.
(d) "Client" means any person or entity, including an investment company, for which Alliance serves as investment manager or adviser.
(e) "Compliance Officer" refers to Alliance's Compliance Officer.
(f) "Control" has the same meaning set forth in Section 2(a)(9) of the Investment Company Act.
(g) "Employee" refers to any person who is an employee of any member of the Alliance Group, including both part-time employees, as well as consultants (acting in the capacity of a portfolio manager, trader or research analyst) under the control of Alliance who, but for their status as consultants, would otherwise come within the definition of Access Person.
(h) "Initial Public Offering" means an offering of securities registered under the Securities Act of 1933, the issuer of which, immediately before the registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934.
(i) "Investment Personnel" refers to:
(i) any Employee who acts in the capacity of a portfolio manager, research analyst or trader;
(ii) any Employee who assists someone acting in the capacity of a portfolio manager, research analyst or trader and as an assistant has access to information generated or used by portfolio managers, research analysts and traders (including, for example, assistants who have access to the Alliance Global Equity Review or the Alliance Fixed Income Review);
(iii) any Employee who receives the Alliance Global Equity Review or the Alliance Fixed Income Review; or
(iv) any natural person who Controls Alliance and who obtains information concerning recommendations made to a Client regarding the purchase or sale of securities by the Client.
(j) "Limited Offering" means an offering that is exempt from registration under the Securities Act of 1933 pursuant to Sections 4(2) or 4(6) thereof or pursuant to Rules 504, 505 or 506 under the Securities Act of 1933.
(k) "Personal Account" refers to any account (including, without limitation, a custody account, safekeeping account and an account maintained by an entity that may act in a brokerage or a principal capacity) in which an Access Person or Employee has any Beneficial Ownership and any such account maintained by or for a financial dependent. For example, this definition includes Personal Accounts of:
(i) an Access Person's or Employee's spouse, including a legally separated or divorced spouse who is a financial dependent,
(ii) financial dependents residing with the Access Person or Employee, and
(iii) any person financially dependent on an Access Person or Employee who does not reside with that person, including financially dependent children away at college.
(l) "Purchase or Sale of a Security" includes, among other transactions, the writing or purchase of an option to sell a Security and any short sale of a Security.
(m) "Security" has the meaning set forth in Section 2(a)(36) of the Investment Company Act and any derivative thereof, commodities, options or forward contracts, except that it shall not include shares of open-end investment companies registered under the Investment Company Act, securities issued by the Government of the United States, short-term debt securities that are government securities within the meaning of Section 2(a)(16) of the Investment Company Act, bankers' acceptances, bank certificates of deposit, commercial paper, and such other money market instruments as are designated by the Compliance Officer.
(n) "Security held or to be acquired or sold" means:
(i) any Security which, within the most recent 15 days
(1) is or has been held by a Client or (2) is being
or has been considered by a Client (to the extent
known by Alliance) or Alliance for purchase by the
Client; and
(ii) any option to purchase or sell, and any Security convertible into or exchangeable for, a Security.
(o) "Subsidiary" refers to either of the following types of entities with respect to which Alliance, directly or indirectly, through the ownership of voting securities, by contract or otherwise has the power to direct or cause the direction of management or policies of such entity:
(i) any U.S. entity engaged in money management; and
(ii) any non-U.S. entity engaged in money management for U.S. accounts.
(a) This Code and Statement applies to all Employees and to all other individuals who are Access Persons. Please note that certain provisions apply to all Employees while other provisions apply only to Access Persons and others apply only to certain categories of Access Persons who are also Investment Personnel (e.g., portfolio managers and research analysts).
(b) Alliance will provide a copy of this Code and Statement to all Employees and all individuals who are Access Persons. In addition, the Compliance Officer will maintain lists of Access Persons and Investment Personnel, including a separate list of portfolio managers and research analysts.
(a) All Employees
It is the responsibility of each employee to ensure that all personal securities transactions are made in strict compliance with the restrictions and procedures in the Code and Statement and otherwise comply with all applicable legal and regulatory requirements. Employees must hold all Securities in a Personal Account. This requirement applies to all types of personal securities transactions including, for example, the purchase of Securities in a private placement or other direct investment. In addition, employees may not take physical possession of certificates or other formal evidence of ownership. Personal securities transactions for employees may be effectedly in a Personal Account and in accordance with the following provisions:
Personal Accounts of an employee that are maintained as brokerage accounts must be held at the following designated broker-dealers: Donaldson, Lufkin & Jenrette Securities Corporation, DLJ Direct, Merrill Lynch & Co. or Charles Schwab. In addition, employees who currently maintain a Personal Account at Sanford C. Bernstein & Co., LLC should continue to use this account for all personal securities transactions.
An employee may not purchase or sell a Security, or engage in any short sale of a Security, in a Personal Account if, at the time of the transaction, the Security is being considered for purchase or sale for a Client or is being purchased or sold for a Client. The following non-exhaustive list of examples illustrates this restriction:
. An Alliance research analyst issues research information (including as part of the daily morning call) regarding initial coverage of, or changing a rating with respect to, a Security.
. A portfolio manager has, during the daily morning call, indicated his or her intention to purchase or sell a Security.
. A portfolio manager places an order in the Security to purchase or sell the Security for a Client.
. An open order in the Security exists on the trading desk.
. An open limit order exists on the trading desk, and it is reasonably likely that the Security will reach that limit price in the near future.
A Security may not be purchased or sold in a Personal Account if, at the time of the transaction, the Security appears on the Alliance Daily Restricted List and is restricted for Employee transactions. The Daily Restricted List is made available each business day to all Employees via Lotus Notes and the Alliance Alert.
An Employee may not purchase or sell, directly or indirectly, any Security in which the Employee has (or after such transaction would have) any Beneficial Ownership unless the Employee obtains the prior written approval to the transaction from the Compliance Department and, in the case of Investment Personnel, the head of the business unit in which the Employee works. A request for preclearance must be made in writing in advance of the contemplated transaction and must state:
a. the name of the Security involved,
b. the number of shares or principal amount to be purchased or sold, and
c. a response to all questions contained in the appropriate pre-clearance form.
Preclearance requests will be acted on only between the hours of 10:00 a.m. and 3:30 p.m. Any approval given under this paragraph will remain in effect only until the end of the trading day on which the approval was granted.
When a Security is being considered for purchase or sale for a Client or is being purchased or sold for a Client following the approval on the same day of a personal trading request form with respect to the same security, the Compliance Department is authorized to cancel the personal order if (x) it has not been executed and the order exceeds a market value of $50,000 or (y) the Compliance Department determines, after consulting with the trading desk and the appropriate business unit head (if available), that the order, based on market conditions, liquidity and other relevant factors, could have an adverse impact on a Client or on a Client's ability to purchase or sell the Security or other Securities of the issuer involved.
No more than an aggregate of 20 securities transactions may occur in an Employee's Personal Accounts in any consecutive thirty-day period.
An Employee may not buy or sell any Security that is the subject of "significantly new" or "significantly changed" research during a forty-eight hour period commencing with the first publication or release of the research. The terms "significantly new" and "significantly changed" include:
a. the initiation of coverage by an Alliance research analysts;
b. any change in a research rating or position by an Alliance research analyst (unless the research analyst who makes the change advises the Compliance Department in writing that the change is the result of an unanticipated widely disseminated announcement or market event, e.g., the announcement of a major earnings warning as opposed to the research analysts independently rethinking his or her subjective assessment of the security); and
c. any other rating, view, opinion, or advice from an Alliance research analyst, the issuance (or reissuance) of which in the opinion of such research analyst or head of research would be reasonably likely to have a material effect on the price of the security.
No Employee shall acquire any direct or indirect Beneficial Ownership in any Securities in any Initial Public Offering.
No Employee shall acquire any Beneficial Ownership in any Securities in any Limited Offering of Securities unless the Compliance Officer and the business unit head give express prior written approval and document the basis for granting or denying approval after due inquiry. The Compliance Officer, in determining whether approval should be given, will take into account, among other factors, whether the investment opportunity should be reserved for a Client and whether the opportunity is being offered to the individual by virtue of his or her position with the Alliance Group. Employees authorized to acquire Securities in a Limited Offering must disclose that investment when they play a part in any Client's subsequent consideration of an investment in the issuer, and in such a case, the decision of Alliance to purchase Securities of that issuer for a Client will be subject to an independent review by Investment Personnel with no personal interest in such issuer.
In addition to the requirements set forth in paragraph (a) of this Section 4, the following restrictions apply to all Access Persons:
No Access Person shall engage in any short sale of a Security if, at the time of the transaction, any Client has a long position in such Security (except that an Access Person may engage in short sales against the box and covered call writing provided that these personal securities transactions do not violate the prohibition against short-term trading).
All Access Persons are subject to a mandatory buy and hold of all Securities for 60 calendar days. An Access Person may, however, after 30 calendar days, sell a Security if the sale price is lower than the original purchase price (i.e., at a loss on the original investment). Any trade made in violation of this paragraph shall be unwound, or, if that is not practicable, all profits from the short-term trading must be disgorged as directed by the Compliance Officer.
Any non-Employee Access Person with actual knowledge that a Security is being considered for purchase or sale for a Client may not purchase or sell such Security.
In addition to the requirements set forth in paragraphs (a) and (b) of this Section 4, the following restrictions apply to all Investment Personnel:
No Investment Personnel shall serve on any board of directors or trustees or in any other management capacity of any private or public company without prior written authorization from the Compliance Officer based upon a determination that such service would not be inconsistent with the interests of any Client. This prohibition does not include non-profit corporations, charities or foundations; however, approval from the Investment Personnel's supervisor is necessary.
No Investment Personnel shall receive any gift or other thing of more than de minimis value from any person or entity, other than a member of the Alliance
Group, that does business with Alliance on behalf of a Client, provided, however, that receipt of the following shall not be prohibited:
a. an occasional breakfast, luncheon, dinner or reception, ticket to a sporting event or the theater, or comparable entertainment, that is not so frequent, so costly, nor so extensive as to raise any question of impropriety;
b. a breakfast, luncheon, dinner, reception or cocktail party in conjunction with a bona fide business meeting; and
c. a gift approved in writing by the Compliance Officer.
In addition to the requirements set forth in paragraphs (a),
(b) and (c) of this Section 4, the following restrictions
apply to all persons acting in the capacity of a portfolio
manager of a Client account:
No person acting in the capacity of a portfolio manager shall buy or sell a Security for a Personal Account within seven calendar days before and after a Client trades in that Security. In the case of Client accounts managed by more than one portfolio manager, this restriction will apply to the portfolio manager who makes the decision to purchase or sell the relevant Security. If a portfolio manager engages in such a personal securities transaction during a blackout period, the Compliance Officer will break the trade or, if the trade cannot be broken, the Compliance Officer will direct that any profit realized on the trade be disgorged.
No person acting in the capacity of a portfolio manager shall delay or accelerate a Client trade due to a previous purchase or sale of a Security for a Personal Account. In the event that a portfolio manager determines that it is in the best interest of a Client to buy or sell a Security for the account of the Client within seven days of the purchase or sale of the same Security in a Personal Account, the portfolio manager should contact the Compliance Officer immediately who may direct that the trade in the Personal Account be canceled or take other appropriate relief.
No person acting in the capacity of a portfolio manager shall purchase or sell a Security in a Personal Account contrary to investment decisions made on behalf of a Client, unless the portfolio manager represents and warrants in the personal trading request form that (x) it is appropriate for the Client account to buy, sell or continue to hold that Security and (y) the decision to purchase or sell the Security for the Personal Account arises from the need to raise or invest cash or some other
valid reason specified by the portfolio manager and approved by the Compliance Officer and is not otherwise based on the portfolio manager's view of how the Security is likely to perform.
In addition to the requirements set forth in paragraphs (a), (b), (c) of this Section 4, the following restrictions apply to all persons acting in the capacity of a research analyst:
No person acting as a research analyst shall buy or sell a Security within seven calendar days before and after making a change in a rating or other published view with respect to that Security. If a research analyst engages in such a personal securities transaction during a blackout period, the Compliance Officer will break the trade or, if the trade cannot be broken, the Compliance Officer will direct that any profit realized on the trade be disgorged.
No person acting as a research analyst shall delay or accelerate a rating or other published view with respect to any Security because of a previous purchase or sale of a Security in such person's Personal Account. In the event that a research analyst determines that it is appropriate to make a change in a rating or other published view within seven days of the purchase or sale of the same Security in a Personal Account, the research analyst should contact the Compliance Officer immediately who may direct that the trade in the Personal Account be canceled or take other appropriate relief.
No person acting as a research analyst shall purchase or sell a Security (to the extent such Security is included in the research analyst's research universe) contrary to an outstanding rating or a pending ratings change, unless (x) the research analyst represents and warrants in the personal trading request form that (as applicable) there is no reason to change the outstanding rating and (y) the research analyst's personal trade arises from the need to raise or invest cash or some other valid reason specified by the research analyst and approved by the Compliance Officer and is not otherwise based on the research analyst's view of how the security is likely to perform.
(a) The pre-clearance requirements, as described in Section 4(a)(iv) of this Code and Statement, do not apply to:
Purchases or sales that are non-volitional (including, for example, any Security received as part of an individual's compensation) on the part of an Employee (and any Access Person who is not an Employee) or are pursuant to a dividend reinvestment plan (up to an amount equal to the cash value of a regularly declared dividend, but not in excess of this amount).
Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of the issuer's Securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired. This exemption applies only to the exercise or sale of rights that are issued in connection with a specific upcoming public offering on a specified date, as opposed to rights acquired from the issuer (such as warrants or options), which may be exercised from time-to-time up until an expiration date. This exemption does not apply to the sale of stock acquired pursuant to the exercise of rights.
(b) The restrictions on effecting transactions in a (1) Security being considered for purchase or sale, as described in Sections 4(a)(ii) and 4(b)(iii) or (2) that is the subject of "significantly new" or "significantly changed" research, as described in Section 4(a)(vi) of this Code and Statement, do not apply to:
Purchases or sales that are non-volitional (including, for example, any Security received as part of an individual's compensation) on the part of an Access Person or are pursuant to a dividend reinvestment plan (up to an amount equal to the cash value of a regularly declared dividend, but not in excess of this amount).
Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of the issuer's Securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired. This exemption applies only to the exercise or sale of rights that are issued in connection with a specific upcoming public offering on a specified date, as opposed to rights acquired from the issuer (such as warrants or options), which may be exercised from time-to-time up until an expiration date. This exemption does not apply to the sale of stock acquired pursuant to the exercise of rights.
Any of the following Securities, if at the time of the transaction, the Access Person has no actual knowledge that the Security is being considered for purchase or sale by a Client, that the Security is being purchased or sold by the Client or that the Security is the subject of significantly new or significantly changed research:
a. Fixed income securities transaction involving no more than 100 units or having a principal amount not exceeding $25,000; or
b. Non-convertible debt securities and non-convertible preferred stocks which are rated by at least one nationally recognized statistical rating organization ("NRSRO") in one of the three highest investment grade rating categories.
Any equity Securities transaction, or series of related transactions, involving shares of common stock and excluding options, warrants, rights and other derivatives, provided
a. any orders are entered after 10:00 a.m. and before 3:00 p.m. and are not designated as "market on open" or "market on close";
b. the aggregate value of the transactions do not exceed (1) $10,000 for securities with a market capitalization of less than $1 billion; (2) $25,000 for securities with a market capitalization of $1 billion to $5 billion and (3) $50,000 for securities with a market capitalization of greater than $5 billion; and
c. the Access Person has no actual knowledge that the Security is being considered for purchase or sale by a Client, that the Security is being purchased or sold by or for the Client or that the Security is the subject of significantly new or significantly changed research.
PLEASE NOTE: Even if your trade qualifies for a de minimus exception, you must pre-clear your transaction with the Compliance Department in advance of placing the trade.
The restrictions on Employees and Access Persons, as described in Sections 4(a) and 4(b) of this Code and Statement, do not apply to non-Employee Access Persons, if at the time of the transaction involved, such person has no actual knowledge that the Security involved is being considered for purchase or sale.
In addition to the exceptions contained in Section 5(a) and (b), the Compliance Officer may, in very limited circumstances, grant other exceptions under any Section of the Code and Statement on a case-by-case basis, provided:
(i) The individual seeking the exception furnishes to the Compliance Officer:
a. a written statement detailing the efforts made to comply with the requirement from which the individual seeks an exception;
b. a written statement containing a representation and warranty that (1) compliance with the requirement would impose a severe undue hardship on the individual and (2) the exception would not, in any manner or degree, harm or defraud the Client or compromise the individual's or Alliance's fiduciary duty to any Client; and
c. any supporting documentation that the Compliance Officer may request;
(ii) The Compliance Officer conducts an interview with the individual or takes such other steps the Compliance Officer deems appropriate in order to verify that granting the exception will not in any manner or degree, harm or defraud the Client or compromise the individual's or Alliance's fiduciary duty to any Client; and
(iii) The Compliance Officer maintains, along with statements provided by the individual, a written record that contains:
a. the name of the individual;
b. the specific requirement of Section 4 from which the individual sought an exception;
c. the name of the Security involved, the number of shares or principal amount purchased or sold, and the date or dates on which the Securities were purchased or sold;
d. the reason(s) the individual sought an exception from the requirements of Section 4;
e. the efforts the individual made to comply with the requirements of Section 4 from which the individual sought to be excepted; and
f. the independent basis upon which the Compliance Officer believes that the exemption should be granted.
(e) Any Employee or Access Person who acquires an interest in any private investment fund (including a "hedge fund") or any other Security that cannot be purchased and held in a Personal Account shall be excepted from the requirement that all Securities be held in a Personal Account, as described in Section 4(a) of this Code and Statement. Such Employee or Access Person shall provide the Compliance Officer with a written statement detailing the reason why such Security cannot be purchased and held in a Personal Account. Transactions in these Securities nevertheless remain subject to all other requirements of this Code and Statement, including applicable private placement procedures, preclearance requirements and blackout period trading restrictions.
Upon commencement of employment with a member of the Alliance Group, an employee must provide an Initial Holdings Report to the Compliance Officer disclosing the following:
(i) all Securities beneficially owned by the employee (including the title, number of shares and/or principal amount of each Security beneficially owned);
(ii) the name of any broker-dealer or financial institution where the employee maintains a Personal Account; and
(iii) the date the report is submitted by the employee.
This report must be submitted no later than 10 days after joining Alliance.
Each Access Person must, by January 30 of each year, provide an annual holdings report to the Compliance Officer disclosing the following:
(i) all Securities beneficially owned by the Access Person (including the title, number of shares and/or principal amount of each Security beneficially owned);
(ii) the name of any broker-dealer or financial institution where the Access Person maintains a Personal Account; and
(iii) the date the report is submitted by the Access Person.
The information must be current as of a date not more than 30
days before the report is submitted. In the event that Alliance
already maintains a record of the required information via account
statements received from the Access Person's broker-dealer, an Access
Person may satisfy this requirement by (i) confirming in writing
(which may include e-mail) the accuracy of the record and (ii)
recording the date of the confirmation.
Every Access Person who is not an Employee of Alliance, shall report to the Compliance Officer the information described in Section 6(a) and (b) as well as 6(e) below with respect to transactions in any Security in which such Access Person has, or by reason of such transaction acquires, any Beneficial Ownership in the Security; provided, however, that such Access Person is not required to make a report with respect to transactions effected in any account over which the Access Person does not have any direct or indirect influence or control, including such an account in which an Access Person has any Beneficial Ownership.
As non-employee Access Persons, affiliated directors are also required to
provide the Compliance Department with the information set forth in
Sections 6 (a) and 6 (b), above. Non-affiliated directors are only required
to provide the Compliance Department with the information set forth in
Section 6 (e) below.
Every report of a non-Employee Access Person required by Section 6(c) above shall be in writing and shall be delivered not later than ten days after the end of the calendar quarter in which a transaction to which the report relates was effected, and shall contain the following information:
(i) the date of the transaction, the title and the number of shares, and the principal amount of each Security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
(iii) the price at which the transaction was effected; and
(iv) the name of the broker, dealer or bank with or through whom the transaction was effected.
Any such report may contain a statement that the report is not to be construed as an admission by the person making the report that he or she has any direct or indirect Beneficial Ownership in the Security to which the report relates.
The Compliance Officer shall maintain the information required by
Section 6 and such other records, if any, as are required by Rule
17j-1 under the Investment Company Act and Rule 204-2 under the
Advisers Act. All reports furnished pursuant to this Section will be
kept confidential, subject to the rights of inspection by the
Compliance Officer, the Transaction Compliance Committee, the
Securities and Exchange Commission and by other third parties pursuant
to applicable law.
Each person subject to this Code and Statement must certify annually that he or she has read and understands this Code and Statement, recognizes that he or she is subject thereto and has complied with its provisions and disclosed or reported all personal Securities transactions required to be disclosed or reported by this Code and Statement. Such certificates and reports are to be given to the Compliance Officer.
Upon learning of a violation of this Code and Statement, any member of the Alliance Group, with the advice of the Compliance Officer, may impose such sanctions as it deems appropriate, including, among other things, censure, suspension or termination of service. Individuals subject to this Code and Statement who fail to comply with this Code and Statement may also be violating the federal securities laws or other federal and state laws. Any such person who is suspected of violating this Code and Statement should be reported immediately to the Compliance Officer.
I hereby acknowledge receipt of the Code of Ethics and Statement of Policy and Procedures Regarding Personal Securities Transactions (the "Code and Statement") of Alliance Capital Management L.P. and its Subsidiaries. I certify that I have read and understand the Code and Statement and recognize that I am subject to its provisions. I also certify that I have complied with the requirements of the Code and Statement and have disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the Code and Statement.
Name ____________________________________
(please print)
Signature ____________________________________
Date ____________________________________